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Municipal bonds stopped a month-long slump today and tried to follow in the footsteps of the Treasury market, which staged a rally in the afternoon.
Municipal securities were in no way able to follow government bonds in terms of the size of the gains, but a significant bid returned to tax-exempt securities for the first time since early February.
In terms of day-to-day total returns:
-- The high-grade, short end of the curve showed a total return of positive 0.02%, according to Municipal Market Advisors (MMA) data.
-- The high-grade, intermediate part of the curve showed a total return of positive 0.10%.
-- The high-grade, long end of the curve showed a total return of positive 0.12%.
The high-grade marketplace of bonds rated double-A or better posted minor gains today. All morning and into the early afternoon high-grades were looking very stagnant. However, the 2:15 p.m. EDT
announcement shook things up and immediately afterward muni bonds started to steadily improve.
Several large money managers stepped into the market looking to take advantage of tax-exempt securities that suddenly looked quite cheap when compared to the 10- or 30-year Treasury that made 45- and 25-basis points swings today. This bid along with several large banks turned the market around.
In the non-investment grade sector of non-rated bonds or single-A and lower, milder gains were posted when compared to high-grades. Again, earlier in the day this sector was taking a beating as new issues in the single-A range were selling very cheap and acting to dilute the price of much outstanding debt. But lower-rated bonds could not escape the mid-afternoon turnaround of most fixed-income today and these credits also improved slightly.
The new-issue market was again large today as Wisconsin continued to offer bonds to retail investors and other deals moved into institutional pricings wherein large banks can buy the securities. There was concern that many of these deals were going to encounter more difficultly as the week progressed and prices continued to decline.
However, with the change in market tone, word on the street is that many of the high-grade deals are now getting cleaned up. The market breathed a collective sigh of relief this afternoon because it was looking as though this $1 billion Wisconsin offering was really having a hard time.
Major deals priced today:
-- $1.028 billion general fund annual appropriation bonds for Wisconsin; A1/AA-/A+; retail only.
-- $450 million wastewater system revenue bonds for Los Angeles, Calif.; Aa3/AA/AA; institutions and retail.
-- $445 million mental health services facilities improvement revenue bonds for the Dormitory Authority of the State of New York; NR/AA-/A; institutions and retail.
-- $350 million general obligation bonds for the Los Angeles Community College District; Aa2/AA/NR; institutions and retail.
Below is a look at
The Bond Buyer's
30-year "visible" supply, or the total amount of announced issuance in the next 30 days. Today it reached over $19.5 billion, a record high for 2009. It is also well above the 3-year average, which is why supply has been on the minds of market participants in the past week or so.
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.