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Municipal bonds declined again today, marking the 20th straight session where the 30-year maturity, triple-A credit did not gain. A building new-issue calendar this week and a selloff in the Treasury market made for a difficult day in the tax-exempt securities market.
Meantime, the new-issue market kicked off the week quickly with several large offerings to retail investors this morning. The day also contained a highly watched competitive deal that sold at noon.
In terms of day-to-day total returns:
- The high-grade, short end of the curve showed a total return of negative 0.001%, according to Municipal Market Advisors (MMA) data .
- The high-grade, intermediate part of the curve showed a total return of negative 0.02%.
- The high-grade, long end of the curve showed a total return of negative 0.05%.
The high-grade marketplace of bonds rated double-A or better was stagnant. Based on MMA data, high grades haven't had an up day on a broad scale since Feb. 12. In the time from then until now, there have been only a few days when one maturity or another would show a 1- or 2-basis-point improvement.
Aside from that, the market has been on a gradual decline for over a month. This process could get worse this week as the market will digest a $1.5 billion Wisconsin offering on top of over $6 billion in other deals. Today the bid for high-grades was skittish as most participants are either selling bonds to clear room for the new issues or were sidelined waiting to see what happens.
In the non-investment grade sector of non-rated bonds or triple-B and lower, bonds traded worse than their high-grade cousins. This credit sector continued to get banged up as a few large mutual fund families continue to sell bonds here but really the lack of trading has made price transparency difficult. This is not news for those who have been following the market.
The new-issue market, in line with how the market has functioned thus far in 2009, had several retail order periods today. Many will continue to price for retail all week long in hopes of attracting enough demand here so that institutional pricing does not occur or is very small. This is because the institutional element of the market has been minimized over the past year. King County, Wash., sold bonds via a silent auction today, which
Capital won and began to distribute to its clients.
Major deals priced today:
$445 million mental health services facilities improvement revenue bonds for the Dormitory Authority of the State of New York; NR/AA-/A+; retail only.
$300 million limited tax general obligation bonds for King County, Washington; Aa1/AAA/AA+; competitive bid.
229 million tax-exempt general obligation bonds for Connecticut 2 series; Aa3/AA/AA; retail.
$200 million future tax-secured bonds for the New York City Transitional Finance Authority in two series; Aa1/AAA/AA+; retail only.
While I started this article noting a 20-day yield increase, it has been a gradual process as the absolute yield changes are not that large. However, 20 days of declines can have a psychological impact on those actively trading the market or those looking to invest in it.
Matthew Posner is a director with Municipal Market Advisors. Posner writes intraday research, data and commentary on the municipal market and heads up the firm's efforts in Washington, D.C., as an educator of policymakers on the tax-exempt securities market. Founded in 1995, MMA is the leading independent strategy, research and advisory firm in municipal bond industry.