After two days of gains spurred in part by a new set of taxable Build America Bond deals, the municipal market closed the week out with little movement on Friday.
The tax-exempt market had firmed Wednesday and Thursday after previously pulling back from an April rally that was driven in part by long-term supply concerns fueled by heavy BAB borrowing from some of the market's biggest issuers. After gradually nudging up beginning April 23, yields once again pushed downward on Wednesday, with some more BABs entering the market.
The yield on a triple-A, 30-year general obligation bond fell to fell to 4.47% following trading Friday, after starting the week at 4.58%, according to Municipal Market Data. The Bond Buyer 40-bond index yield-to-maturity hit a 2009 low on Friday of 5.31%.
"It's quieted down a bit, but we had a nice run," a trader said. "There's definitely interest, and we're seeing a firmer tone."
Lower-rated credits have also enjoyed recent gains. The Merrill Lynch & Co. single-A municipal total return index rose 3.25% in April, compared to a 1.39% gain in the triple-A index.
As of Thursday, the single-A index had gained 0.92% for the week, compared to a 0.34% gain for the triple-A index.
"It's a gross yield thing," said Matthew Dalton, chief executive officer and managing partner at Belle Haven Investments. "The retail buyers are just shying away from muni bonds in seven and eight years, 1.75% on a gross yield. So they're searching for the higher-yielding stuff, and that's bringing the A-rated and triple-B credits back to life. ... You've got an abundance of cash coming in and they're getting finicky. The fear of credit waned a little bit and the trade-off is the 3.5%, 4%, 4.5%, 5% starts to make sense to them."
The Treasury market gained Friday. The yield on the benchmark 10-year note, which opened at 3.33%, closed at 3.28%. The yield on the two-year note finished at 0.97% after opening at 0.99%. The yield on the 30-year bond, which opened at 4.29%, was quoted recently at 4.27%.
In economic data released Friday, the unemployment rate rose to 8.9% in April from 8.5% in March, marking the worst numbers since September 1983. That number was in line with what economists polled by Thomson Reuters expected. The broader U6 unemployment number, which includes underemployed workers, rose to 15.8% in April.
Nonfarm payrolls fell 539,000 in April, better than economists' expectations of a loss of 620,000 jobs. However, February and March numbers were revised downward by 66,000.
This week's slate of economic data will include April retail sales numbers on Wednesday and April consumer and produce price indexes on Thursday.
