Yields in the municipal market followed the strength of Treasuries on Friday morning but then let go of earlier gains and closed the week unchanged from Thursday levels.
New supply was light on Friday and secondary market activity was described as moderate early in the session and all but dead in the afternoon.
“There were a few names out for the bid early this morning, but guys kind of called it quits after three heavy days,” a trader in San Francisco said. “Even though we saw a rally in the Treasury market, I don’t think anything changed in the muni market at all.”
A trader in Chicago called the tone “a smidge better” but said larger deals weren’t being traded. “It’s the smaller trades that are getting things done,” he said.
Several participants said afternoon trading was light on account of it being Friday, the start of Yom Kippur, and sunny weather in Chicago accompanying Oktoberfest.
“Use any excuse you want,” the Chicago trader said. “All those things add to up a much slower pace this afternoon than an ordinarily slow Friday.”
In the new-issue market, Wells Fargo priced $99.4 million of refunding debt for the Maine Municipal Bond Bank.
The tax-exempt bonds mature between 2012 and 2034, with yields ranging from 0.55% to 4.03%.
The state agency is rated triple-A by Standard & Poor’s and Moody’s Investors Service. It has provided Maine’s cities, towns, school systems, water and sewer districts, and other governmental entities access to low-cost capital funds for almost four decades.
The Municipal Market Data triple-A scale yielded 2.40% in 10 years and 3.34% in 20 years Friday, unchanged from Thursday. The scale for 30-year debt also remained unchanged at 3.76%.
Munis have generally been weakening in the past two weeks after a series of record lows in late August.
Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25. The 20-year low of 3.28% was set Aug. 31.
Thursday’s triple-A muni scale in 10 years was at 87.0% of comparable Treasuries and 30-year munis were at 95.9%, according to MMD, while 30-year tax-exempt triple-A GO bonds were at 105.3% of the comparable London Interbank Offered Rate.
Treasuries strengthened Friday morning and accelerated after a key consumer sentiment survey fell 2.3 points in September to 66.6, its lowest since August 2009. Treasuries gave up much of their gains in the late afternoon.
“A lot of it was based on sovereign fear with what was going on in Ireland,” the San Francisco trader said, referring to speculation that Ireland may need financial assistance. “There was a flight to quality earlier this morning, but some of those fears subsided and then it was back to business as usual.”
The benchmark 10-year Treasury note closed the week at 2.75%, one basis point lower than Thursday’s close at 2.76%. Earlier in the morning it yielded 2.73%.
The 30-year bond closed at 3.91%, or two basis points lower than Thursday’s close at 3.93%. The two-year note ended the session at 0.48%, one basis point lower than Thursday’s 0.49% and just three basis points higher than the record low of 0.45% seen on Aug. 24.
