The municipal market was mostly unchanged Friday in fairly light secondary trading activity.
“Retail is shutdown,” a trader in Los Angeles said. “Without retail, we are nothing. They pretty much drive the market, and it spurs traders to come back on the Street to purchase bonds. We are on shutdown mode right now. Today, bids are at zero. On Fridays, unfortunately, it’s a lot of attitude and apathy, just one or two guys who want to do something constructive.”
A trader in New York added that it was relatively busy early in the session, before activity faded away. The trader also noted that yields haven’t been attractive enough to entice the retail buyer, who is typically looking for “closer to a 4.00% yield.”
“Bonds in 2024 were trading down a little bit. Those were cheaper today,” the trader said. “A lot of deals were slow moving though.”
The Treasury market was stronger Friday. The benchmark 10-year Treasury note finished at 3.22% after opening at 3.32%. The 30-year Treasury bond finished at 4.14% after opening at 4.23%. The two-year Treasury note was quoted near the end of the session at 0.73% after opening at 0.78%.
The Municipal Market Data triple-A scale yielded 2.93% in 10 years and 3.73% in 20 years Friday, matching levels of 2.93% and 3.73% on Thursday. The scale yielded 4.04% in 30 years Friday, matching Thursday.
Thursday’s triple-A muni scale in 10 years was at 88.3% of comparable Treasuries and 30-year munis were at 95.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 99.3% of the comparable London Interbank Offered Rate.
Trades reported by the Municipal Securities Rulemaking Board Friday showed little movement. Bonds from an interdealer trade of California 5s of 2037 yielded 5.22%, even with where they traded Thursday. A dealer sold to a customer Massachusetts 5.25s of 2022 at 3.52%, even with where they were sold Thursday. A dealer sold to a customer taxable University of Virginia Build America Bonds 6.2s of 2039 at 5.09%, even with where they traded Thursday.
In economic data released Friday, retail sales unexpectedly dropped at a seasonally adjusted 1.2% pace in May, contrary to economists’ estimates of an increase, to post the first decline in eight months. Retail sales excluding autos and parts fell 1.1%, the largest decline since March 2009.
Economists polled by Thomson Reuters expected total retail sales to increase 0.2% and for sales excluding autos to increase 0.1%, according to the median estimate. Retail sales last declined in September when they fell 2.2%.
Business inventories increased 0.4% in April, the fourth consecutive monthly increase, while sales were up 0.6% in the month. Inventories in March were revised higher to a 0.7% gain from the 0.4% increase initially reported. Economists expected inventories to rise 0.5% in April, according to the median estimate from Thomson Reuters.
The University of Michigan’s consumer sentiment index reading was 75.5, compared to the final May 73.6 reading. Economists polled by Thomson predicted a 74.5 reading. New-issue activity was light Friday.
Priti Patnaik contributed to this column.
