U.S. Treasury Market Volatility Scrambles Muni-Issue Calendar
May 17, 2011
Late Tuesday, underwriters said they expected insured 2021 yields for the Illinois general obligation bonds to break below the 6% level predicted earlier in the day. The Illinois bonds will be sold via competitive bidding. In secondary trading, municipal bonds ended little changed in limited action, although traders described some bargain-hunting for the morning's mark-downs. Munis gained 1/4, compared with a rise of 1/2 in Treasurys; December municipal futures added 10/32, underperforming an advance of 18/32 in Treasurys. Some arbitragers also reportedly were buying in the cash market in order to support their futures positions. Arbitrage is a technique of buying and selling securities to take advantage of small differences in price. The recent volatility in the credit markets is making underwriters hesitant to bring new issues to market. Early Tuesday, Bear Stearns & Co. postponed a $155 million Vastopolis Public Works Board refunding revenue offering. Despite the market's late turnaround, underwriters said the issue probably wouldn't come to market this week. Meanwhile, PaineWebber Inc. said it was keeping its $273 million New York Thruway Authority revenue bond issue on day-to-day status, although underwriters said it was unlikely to come to market Wednesday.
