Municipals rebounded from a 1/2 point morning deficit to finish slightly lower overall yesterday.
"Actually it's just a blah Monday," one trader said. Dollar bonds ended 1/4 point lower, while high-grades ended unchanged in light secondary activity.
Market participants yesterday cited a lack of new issues to give the market direction.
"People aren't quite sure where [the market] is," one analyst said, adding that players probably will be looking to today's $400 million competitive California general obligation offering to give the market some direction.
"Technically, we are in good shape," a trader said, citing "a lot of retail demand," particularly in the 10-year and shorter range.
Denver International Airport bonds, however, suffered declines ranging from 1 to 1 3/8 points yesterday leading up to the city's announcement late in the afternoon that the airport's opening would be delayed.
Yesterday morning, Moody's Investors Service, which rates the airport debt conditional Baa1, said in a statement that weekend conversations with Denver officials led Moody's to believe the opening would be delayed beyond May 15. The rater put the debt under review with negative implications.
Elsewhere yesterday, in late secondary dollar bond trading, Chicago Midway MBIA 6 1/4S of 2024 were quoted at 6.58% bid, 6.53% offered.
In debt futures, the June municipal contract settled down 3/32 at 91.00. Yesterday's June MOB spread was negative 431, compared to negative 429 on Friday.
In the Treasury market, the 30-year bond ended down more than 1/4 of a point, to yield 7.32%.
Several factors are putting pressure on the Treasury market, according to Christopher Rupkey, a vice president and financial economist at Mitsubishi Bank.
"I think it's looking ahead toward supply," Rupkey said, noting tomorrow's announcement regarding the size of the Treasury's refunding scheduled for next week. Even though the sale excludes a 30-year offering, "$12 billion 10-year notes in this environment is probably a lot," he said.
Also weighing on the market is the dollar's relationship to the Japanese yen.
The dollar is currently valued at 101.50 yen, and the speculation is that the U.S. currency could break its record low of 100.40 yen, and perhaps fall through 100 yen.
The Japanese markets are closed for the Golden Week holidays through Thursday, Rupkey said, which adds to nervousness.
And, underlying those concerns is the strong belief that the Federal Reserve will again tightening monetary policy. In the past, the question was whether the Fed would act; now it is when.
Moving to the fund side, Robert L. Adler, who runs Arcata, Calif.-based AMG Data Services, recorded inflows of $733 million to municipal bond funds for the week ended April 26. That was the largest amount since the week ended Feb. 2, he said.
In other news, dealer inventories continued to grow as Standard & Poor's Corp.'s The Blue List rose $25 million yesterday, to $1.71 billion from $1.69 billion on Friday. The Blue List has not been that high since April 6, when it reached $1.72 billion. The measure of dealer inventory has now risen for six consecutive days, adding $305 million over that span.
The Bond Buyer's 30-day visible supply moved in the opposite direction, dropping $237 million yesterday to $4.32 billion. The negotiated component fell $248 million to $2.58 billion, the lowest level since March 14 when it was $1.94 billion. The measure of future supply has now been under $5 billion for three straight sessions.