Munis Firmer Following Payrolls Drop

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The municipal market was firmer Friday following a larger-than-expected drop in March nonfarm payrolls.

Traders said tax-exempt yields were lower by three to five basis points.

"The payrolls report pushed Treasury yields lower, and munis just followed that," a trader in Los Angeles said. "There wasn't a whole lot of activity, though, especially not after the morning. I'd say we're at least three or four basis points firmer."

Trades reported by the Municipal Securities Rulemaking Board Friday showed gains.

Bonds from an interdealer trade of Massachusetts Water Pollution Abatement Trust 4.35s of 2025 yielded 4.69%, down four basis points from where they were sold Thursday. Bonds from an interdealer trade of New York Metropolitan Transportation Authority 5s of 2030 yielded 5.04%, four basis points lower than where they were sold Thursday. A dealer sold to a customer insured Nevada 5s of 2026 at 4.71%, three basis points lower than where they were sold Thursday.

A dealer sold to a customer insured Golden State Tobacco Securitization Corp. 5s of 2038 at 5.12%, down four basis points from where they traded Thursday. A dealer sold to a customer Omaha 6.5s of 2030 at 4.99%, down two basis points from where they traded Thursday. A dealer sold to a customer Dormitory Authority of the State of New York 5s of 2037 at 5.07%, three basis points lower than where they were sold Thursday.

The Treasury market showed gains Friday. The yield on the benchmark 10-year Treasury note, which opened at 3.58%, finished at 3.48%. The yield on the two-year note was quoted near the end of the session at 1.82%, after opening at 1.89%.

In economic data released Friday, nonfarm payrolls dropped 80,000 in March, after a revised 76,000 decline the previous month. Economists polled by IFR Markets had predicted that 50,000 jobs were lost in March.

In economic data slated for release this week, wholesale inventories and wholesale sales for February will be released Wednesday. This will be followed Thursday by initial jobless claims for the week ended April 5, and continuing jobless claims for the week ended March 29, and followed Friday by March import prices and the preliminary April University of Michigan consumer sentiment index.

Economists polled by IFR are predicting a 0.5% rise in wholesale inventories, a 0.2% uptick in wholesale sales, 386,000 initial jobless claims, 2.915 million continuing jobless claims, a 1.8% climb in import prices, and a 68.0 level in the Michigan sentiment index.

Activity in the new-issue market was light Friday. However, in the new-issue market next week, a $1.75 billion California general obligation issue planned for pricing by Morgan Stanley on Thursday will give retail investors first crack at the bonds tomorrow and Wednesday. And, although its GO sale is not until next week, Connecticut will kick off a rare, week-long retail order period for its $2 billion sale of taxable GOs - ahead of a pricing on April 14. The proceeds will finance the state's teacher's retirement fund.

 

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