The municipal market was slightly weaker in light trading Friday, while economic data reported that job losses in November were higher than any month in more than 30 years.
After a week of losses, traders said the municipal market showed little activity ahead of the weekend.
"We're just really quiet - it's the end of a pretty long, painful, volatile week," a trader in Chicago said. "If you haven't done anything so far this week, it's hard to really justify doing anything. If you want to buy, there's probably going to be better opportunities next week. And the sellers know they're just not going to get their price right now."
"The market is quiet, tired, and beaten," another trader in Chicago said.
In the new-issue market, JPMorgan preliminary priced $308 million of general obligation bonds for New York City during the first day of a two-day retail order period. Bonds from the $300 million tax-exempt fiscal 2009 Subseries G-1 mature from 2010 through 2031, with term bonds in 2035. Yields ranged from 2.70% with a 3% coupon in 2010 to 6.28% with a 6.25% coupon in 2035.
The tax-exempt bonds, which are callable at par in 2018, are rated Aa3 by Moody's Investors Service, AA by Standard & Poor's, and AA-minus by Fitch Ratings. The offering also includes the $8 million taxable Subseries G-2.
The rest of the new-issue calendar was light.
In economic data, non-farm payrolls fell 533,000 in November, far greater than analysts' already dire expectations. Economists polled by Thomson Reuters had predicted 320,000 jobs would be reported lost in November.
The losses totaled more than in any month since December 1974, when payrolls fell by 602,000. In addition, revisions to the numbers for September and October resulted in an additional 199,000 job losses reported.
Unemployment jumped to 6.7% from 6.5%, marking the highest number since October 1993.
"Companies all across the economy are reacting rapidly and sharply to the growing recession and they are doing that by cutting workers like crazy," Joel Naroff, president and chief economist of Naroff Economic Advisors Inc., said in a report.
Eaton Vance Corp. chief economist Robert MacIntosh said he expects unemployment to peak at around 9%. He does not foresee a recovery until the fourth quarter of next year.
That would mean the current recession would last nearly two years. The organization responsible for tracking business cycles, the National Bureau of Economic Research, determined early this month the recession began last December.
MacIntosh said Friday's unemployment report confirmed his belief this recession would be "a very different recession compared to what we're used to."
Despite the grim data, the Treasury market was mostly weaker Friday. The yield on the benchmark 10-year Treasury note, which opened at 2.55%, closed at 2.70%. The yield on the two-year note closed at 0.92% after opening at 0.81%. The yield on the 30-year bond, which opened at 3.13%, was quoted at 3.01%.
Eric Lascelles, chief economics and rates strategist with TD Securities, said the counterintuitive reaction in the bond market reflects a wedge between economists' consensus estimates published in surveys and the whisper numbers expected in the market.
While surveyed economists predicted job losses of about 320,000, Lascelles said markets girded for a steeper decline.
"A lot of people were steeled for minus 400,000 or minus 500,000," he said. "We were feeling quite grim going into this one."
Lascelles said it would be tough to push rates much lower following an "absolutely stunning rally" the past few weeks, in which the yield on the 10-year Treasury has squeezed to barely more than 2.5% this month from more than 4% in October.
Dan Seymour contributed to this column.
