Fading Treasuries drove the municipal bond market down Tuesday morning as traders said the market opened much lower even after Monday's selloff.
"It feels weak out there," a Chicago trader said. "We've had several days of controlled selling and today it seems like people are waking up and deciding the 30-year muni being 2%-something is not coming back too soon. There are a lot of bonds out for the bid. Thankfully Treasuries are stabilizing a little but the market opened pretty scary."
A weaker market comes as new issue volume is picking up this week.
Later Tuesday, Loop Capital Markets is expected to hold a second retail pricing of $800 million New York City Transitional Finance Authority future tax secured subordinate bonds. The TFA bonds are rated Aa1 by Moody's Investors Service and triple-A by Standard & Poor's and Fitch Ratings.
In the first retail pricing, $167 million orders were placed. Yields ranged from 0.60% with 3% and 4% coupons in a split 2016 maturity to 4.10% with a 4% coupon in 2043. Credits maturing in 2015 were offered in a sealed bid. Debt maturing in 2027, 2028, 2030 through 2032, 2038 and 2043 were not offered for retail. The bonds are callable at par in 2023.
Barclays is expected to price $600 million of Build Illinois Bonds. The sales tax revenue bonds are rated AAA by Standard & Poor's and AA-plus by Fitch.
In the competitive market, Alabama Public School and College Authority is expected to auction $175 million of revenue bonds in two pricings, consisting of $119.1 million and $55.9 million. The bonds are rated Aa1 by Moody's, AA by Standard & Poor's, and AA-plus by Fitch.
Monday, yields on the Municipal Market Data scale ended as much as seven basis points higher. The triple-A 10-year yield rose six basis points to 2.19% and the 30-year yield vaulted seven basis points to 3.41%. The two-year was unchanged at 0.30% for the sixth session.
Muni yields on the Municipal Market Advisors 5% scale closed out as much as six basis points higher. The 10-year yield climbed five basis points to 2.25% and the 30-year yield jumped five basis points to 3.51%. The two-year ticked up one basis point to 0.37%.
Treasury prices drifted lower as yields rose. The benchmark 10-year and 30-year yields rose two basis points each to 2.23% and 3.35%, respectively. The two-year was steady at 0.33%.