Top-rated municipal bonds finished unchanged on Tuesday as some market participants returned to their desks after the long holiday weekend.
Traders were looking ahead to a week that is historically one of the quietest of the year with almost no new issuance scheduled for sale.
Secondary Market
Most traders who were around reported a lackluster session in the tax-exempt market.
The 10-year benchmark muni general obligation yield was flat from 2.39% on Friday, while the yield on the 30-year GO was steady from 3.11%, according to the final read of Municipal Market Data's triple-A scale.
"An active Treasury auction scheduling in this holiday week led to drifty Treasuries right out of the chute. Robust economic releases added to the selling pressure," MMD Senior Market Analyst Randy Smolik wrote in a market comment. "But Treasury market drift was too modest to weigh on munis. Limited muni traders meant limited offerings, allowing sellers to be less flexible on their offerings. Most trading looked steady to firm."
U.S. Treasuries were weaker in late trade on Tuesday. The yield on the two-year Treasury rose to 1.23% from 1.20% on Friday, while the 10-year Treasury yield increased to 2.57% from 2.54%, and the yield on the 30-year Treasury bond gained to 3.15% from 3.11%.
"Tax-exempt yields are unchanged in very light trading across the curve for most credits as overall market activity remains extremely muted following the holiday weekend," according to a Tuesday market comment from ICE Data Services. "Taxables are giving ground in conjunction with the modest selloff among benchmark U.S. Treasuries today. Primary issuance appears virtually wrapped up through year end."
The 10-year muni to Treasury ratio was calculated at 93.1% on Tuesday, compared with 94.1% on Friday, while the 30-year muni to Treasury ratio stood at 99.0%, versus 100.0%, according to MMD.
MSRB: Previous Session's Activity
The Municipal Securities Rulemaking Board reported 23,724 trades on Friday on volume of $7.88 billion.
Prior Week's Actively Traded Issues
Revenue bonds comprised 59.08% of new issuance in the week ended Dec. 23, down from 59.43% in the previous week, according to Markit. General obligation bonds comprised 36.38% of total issuance, up from 35.82%, while taxable bonds made up 4.54%, down from 4.75%.
Some of the most actively traded issues by type were from Puerto Rico, Florida and California.
In the GO bond sector, the Puerto Rico 8s of 2035 were traded 31 times. In the revenue bond sector, the Miami-Dade County, Fla. Aviation 5s of 2041 were traded 21 times. And in the taxable bond sector, the California 7.3s of 2039 were traded 12 times, according to Markit.
Primary Market
Market participants won't have any new issuance to work with this week, as action in the primary won't get started up again until the New Year.
Volume for the week is forecast by Ipreo to drop to about $2 million, and that's comprised of only one competitive bond sale of $2 million and no negotiated deals at all.
Issuers have pretty much packed it in and supply is not expected to reach more normal levels again until 2017.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar increased $854.4 million to $7.76 billion for Wednesday. The total is comprised of $1.36 billion of competitive sales and $6.40 billion of negotiated deals.
