NEW YORK — The municipal market hit the snooze button to start the week.
After underperforming Treasury yields for much of last week, the tax-exempt market appears content find its footing among still-strong technicals. A healthy amount of supply is expected and muni bond mutual fund flows have been pretty positive over the past month and a half.
“I would suspect that the new issues will go well; maybe a little concession is needed to get them done,” a trader in New York said. “But the market is OK, as far as supply. You have a lot of reinvestment money coming in. It’s very quiet, but Treasuries have a decent tone up from the close. Right now, munis look pretty much flat.”
Tax-exempt yields started the week where they ended last week: unchanged. The benchmark 10-year yield and the 30-year yield ended Friday steady at 1.78% and 3.09%, respectively, according to the Municipal Market Data scale. And the two-year yield hovered at 0.31% for the 23rd consecutive trading session.
For the week, the 10-year yield rose three basis points overall. Its yield remains 11 basis points above its record low of 1.67%, set Jan. 18,
The 30-year finished one basis point higher on the week. It stands just four basis points above its record low of 3.05%, set Monday.
Treasury yields started the week up somewhat on the intermediate and long ends of the curve. The benchmark 10-year Treasury yield climbed three basis points from Friday’s close, at 1.74%.
The 30-year yield, which finished flat on Friday, ticked up two basis points to 2.82%. The two-year yield started the week flat at 0.31%.
The industry foresees a decent uptick in volume, with $9.19 billion expected to reach the primary. That compares with $6.83 billion that arrived last week.
This breaks down to $2.73 billion in competitive offerings scheduled for sale, compared with a revised $1.70 billion last week. In addition, $6.46 billion in negotiated deals is slated for sale, versus a revised $5.13 billion last week.
The market will likely keep a close eye on few deals this week. Bank of America Merrill Lynch leads with the week’s biggest deal, arriving in the negotiated market. It expects to price on Wednesday $800 million of New York City general obligation bonds in two series.
The deal is rated Aa2 by Moody’s Investors Service and AA by Standard & Poor’s and Fitch Ratings. The first series, $750 million, and the second, $50 million, should arrive as serials, with maturities from 2012 through 2032.
B of A Merrill should also price $650 million of San Antonio electric and gas systems revenue refunding bonds. They are rated Aa1 by Moody’s, AA by Standard & Poor’s and AA-plus by Fitch. They are expected to arrive Tuesday, at the earliest.
The largest deal in the competitive market hails from the San Francisco Public Utilities Commission. It expects to auction $686 million of water revenue and refunding bonds in two series.
The bonds, which are expected Tuesday, are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s.
