The municipal market was again firmer Friday, while the Municipal Market Data triple-A yield curve scale for the second straight session reached historic lows in both 10 and 20 years.
Traders said tax-exempt yields were lower by two or three basis points overall.
"It's fairly quiet, just because it's Friday really, but there is still some business getting done," a trader in New York said. "It feels a bit better out there, too. We're probably about two or three basis points more expensive overall. Not much of a difference where on the curve you're trading today, it's pretty even. We had been seeing more pronounced gains out long the last few days, but that doesn't appear to be the case today."
The Treasury market showed losses Friday. The yield on the benchmark 10-year note, which opened at 3.38%, finished at 3.48%. The yield on the two-year note finished at 1.01% after opening at 0.94%. The yield on the 30-year bond, which opened at 4.16%, finished at 4.23%. Friday, the MMD triple-A scale dropped to a yield of 2.70% in 10 years and 3.64% in 20 years, down from 2.73% and 3.66% Thursday, respectively.
As of Thursday's close, the triple-A muni scale in 10 years was at 80.3% of comparable Treasuries, according to MMD., while 30-year munis were 97.4% of comparable Treasuries. As of Thursday's close, 30-year tax-exempt triple-A general obligation bonds were at 100.7% of the comparable London Interbank Offered Rate.
Trades reported by the Municipal Securities Rulemaking Board Friday showed gains. A dealer sold to a customer California 5s of 2037 at 5.24%, down two basis points from where they traded Thursday. Bonds from an interdealer trade of Dormitory Authority of the State of New York 5s of 2022 yielded 3.88%, three basis points lower than where they were sold Thursday. A dealer bought from a customer insured New Jersey Transportation Trust Fund Authority 5.5s of 2021 at 3.76%, three basis points lower than where they traded Thursday.
Activity in the new-issue market was light Friday. Leading the new-issue market last week was Morgan Stanley's $982.2 million offering of both taxable Build America Bonds and tax-exempt GOs for Utah. Bonds from the $491.2 million series of BABs mature in 2019 and 2024, yielding 4.15% and 4.55%, respectively, both priced at par, or 2.70% and 2.96%, respectively, after the 35% federal subsidy.
The bonds were priced to yield 70 and 110 basis points over the comparable Treasury yield, respectively. The 2019 maturity is subject to a make-whole redemption at Treasuries plus 15 basis points, and to an extraordinary make-whole call at Treasuries plus 35 basis points. The 2024 maturity is subject to a make-whole redemption at Treasuries plus 20 basis points, and to an extraordinary make-whole call at Treasuries plus 55 basis points.
Bonds from the $490.4 million series of tax-exempt GOs mature from 2011 through 2018, with yields ranging from 0.70% with a 2% coupon in 2011 to 2.68% with a 5% coupon in 2018. The bonds are not callable. The credit is rated triple-A by all three major rating agencies.
