Munis Show Firm Tone With Yields Flat

A firm tone prevailed in the municipal market Friday even as yields remained flat for much of the session, reflecting a similar path by Treasuries.

Tax-exempts moved within narrow ranges, with trading mostly light to moderate amid flurries of activity earlier in the day.

"It's kind of like a turtle race," a Chicago trader said. "People are in and some business is getting done, but I'm not seeing people really anxious to buy or sell. It's certainly slower going than it has been."

Participants reported some reluctance among investors to commit money ahead of the weekend, particularly in light of where the Treasury market might head with continued concerns around finding a solution to Greece's debt problems.

Firmness in municipals continued from late Wednesday and Thursday into Friday's market.

"As the week's progressed, it's certainly gotten easier to sell bonds," a trader in New York said.

In the Treasury market, yields also stayed close to the unchanged mark, edging lower at the close even as stocks rose with the Dow Jones industrial average briefly nudging over the 11,000 mark.

"The key focus is the strengthening of the economy as mirrored in the equity market," said Christopher Rupkey, chief financial economist with Bank of Tokyo-Mitsubishi.

Economic data reported Friday showed wholesale inventories increased 0.6% in February — the largest gain in three months — and wholesale sales increased 0.8%, the 11th consecutive monthly increase. In addition, inventories of durable goods increased 0.5%, the largest increase since September 2008.

Rupkey said the data was a further indication that the economy was bouncing back from recession with firms rebuilding inventories and stores replenishing shelves. "Consumers are buying," he added.

The benchmark 10-year note was quoted near the end of the session with a yield of 3.88%, down from 3.91% at the open. The yield on the two-year finished at 1.06%, also down from 1.09% earlier. The yield on the 30-year bond finished at 4.74% after opening at 4.76%.

The Municipal Market Data triple-A scale yielded 3.14% in 10 years, 3.85% in 20 years, and 4.17% in 30 years. The levels were unchanged from Thursday.

In a light new-issue market, Morgan Stanley priced $15.3 million of refunding revenue bonds for the California Infrastructure and Economic Development Bank on behalf of Pepperdine University.

Finally, Thursday's triple-A muni scale in 10 years was at 80.7% of comparable Treasuries and 30-year munis were at 87.8%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 92.7% of the comparable London Interbank Offered Rate.

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