Yields in the municipal market declined by one to two basis points across the curve on Friday, but the strengthening was hardly impressive considering the much sharper gains among Treasuries.
The Treasury market benefited from a global flight to safety prompted by renewed debt concerns in Europe. Munis benefited somewhat, but were mostly lagging behind.
The benchmark 10-year Treasury closed the week at 3.23%, two basis points lower than Thursday’s close. Early on Friday it fell to a 12-month low of 3.11%, while just seven weeks before, on April 5, it traded at a 52-week high of 3.99%.
That 88-basis point retrenchment was “insane,” one trader in New York said, but considering the global context, he added, “it’s probably the only safe ride in town at the moment.”
In the same seven weeks, the tax-exempt triple-A 10-year yield fell from 3.11% to 2.82%, a decline of 29 basis points, according to Municipal Market Data.
“Relative to Treasuries, we haven’t benefited at all,” the trader said.
Secondary market trading on Friday was described as light, as participants tried to figure out whether current prices are “the new normal” or just temporary.
“This week has been alright,” said a trader in San Francisco. “It’s been better than the last two as far as being able to move paper.”
The 30-year Treasury closed Friday at 4.10%, two basis points lower than Thursday’s close. Earlier in the day the yield dipped as low as 4.01%, its lowest since early October. The two-year note closed at 0.75%, two basis points lower than the prior day’s close. Earlier in the day it traded at 0.68%, not far from its 52-week low of 0.66% on Nov. 30.
The triple-A scale yielded 3.65% in 20 years on Friday, three basis points lower than Thursday’s level, according to MMD. The 30-year yield was 3.96%, two basis points lower than Thursday’s reading.
Thursday’s triple-A muni scale in 10 years was at 87.1% of comparable Treasuries and 30-year munis were at 96.4%, according to MMD.
The new-issue market was quiet on Friday, with no major deals priced.
Among smaller issues, Bank of America Merrill Lynch offered a final pricing on a $37.4 million issue for the Salk Institute for Biological Studies in San Diego. The bonds were rated A1 by Moody’s Investors Service and offered yields from 1.05% in 2011 to 5.25% in 2040.
Also, RBC Capital Markets priced $9 million of capital appreciation bonds for Little Lake City School District in Los Angeles County. The deal, rated double-A-minus by Moody’s and Standard & Poor’s, matures between 2027 and 2029, with yields to maturity ranging from 6.03% to 6.23%.
No significant economic data was released.
