The tax-exempt market showed more gains Wednesday morning as traders noted there seemed to be little sign of slowing. Supply and demand factors are expected to remain favorable throughout the summer, pushing munis higher.
"We are a little firmer today," a New York trader said. "Treasuries are coming back. We will probably resume buying again shortly."
Munis continued to gain Wednesday morning, according to the Municipal Market Data scale. Yields inside five years were steady while yields outside six years fell as much as two basis points.
On Tuesday, the two-year closed at 0.31% for the seventh consecutive trading session. The 10-year yield plunged three basis points to 1.62%, breaking the previous record low of 1.65% set Monday. The 30-year yield fell one basis point to set a record low of 2.80%, breaking the previous record of 2.81% set Monday.
Tuesday marked the 22nd consecutive trading session where munis traded steady or firmer. Since the most recent rally began on June 22, yields on the 10-year have fallen 24 basis points while the 30-year yield has plunged 36 basis points.
Treasuries were steady to firmer. The two-year and benchmark 10-year was steady at 0.23% and 1.41%. The 30-year yield fell one basis point to 2.46%.
In the primary market, Barclays Capital is expected to price for retail $900 million of University of California Regents limited project revenue bonds in tax-exempt and taxable series. The bonds are rated Aa2 by Moody's Investors Service, AA-minus by Standard & Poor's and AA by Fitch Ratings.
The first series should consist of $800 million of non-alternative minimum tax tax-exempt bonds. The second series is expected to bring $100 million of taxable paper.
Barclays also is expected to price $381.1 million of Dallas and Fort Worth International Airport joint revenue improvement bonds, subject to the AMT. The bonds are rated A1 by Moody's and A-plus by Standard & Poor's and Fitch.
Citi is expected to price $199 million of Harris County, Texas, toll road senior lien revenue refunding bonds, rated Aa3 by Moody's and AA-minus by Standard & Poor's.
In economic news, new home sales fell 8.4% to an annual rate of 350,000 in June.
"The string of disappointing data continues, and now appears to have infected the recently recovering housing market," wrote Sal Guatieri, senior economist at BMO Capital Markets. "Despite the sharp drop in sales, inventories of new homes rose only modestly and remain close to record lows, putting builders in a better mood. Believe it or not, residential construction likely led economic growth for the third straight quarter in Q2. With the Fed on special alert for signs of a pickup in economic activity, it won't find any in today's report."