Munis Slightly Weaker After Run of Firmness

The municipal market was slightly weaker Friday amid fairly light secondary trading ­activity.

Traders said tax-exempt yields increased one to three basis points overall, ending a three-day string of firmness that began with the release Tuesday of the Federal Open Market Committee ­statement.

“It’s more or less a quiet finish to the week,” a trader in Los Angeles said. “We’re giving back some of the gains from earlier in the week. I don’t think we’re down more than two basis points or so, but we’re seeing some losses.”

The Municipal Market Data triple-A scale yielded 2.32% in 10 years Friday, one basis point higher than Thursday’s close, while the 20-year scale yielded 3.28%, equaling the record low matched Thursday. The scale for 30-year debt increased one basis point to 3.70%.

“We might be a little bit weaker, but it’s mostly flat,” a trader in New York said. “We’re down at most a basis point or two right now. There isn’t a whole lot ­trading.”

The weakening ends gains that have been experienced since Tuesday. The three-day rally marks a reversal of the trend seen the prior three weeks, in which muni yields rose from 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%, matched Thursday and Friday, was established Aug. 31.

Friday’s triple-A muni scale in 10 years was at 88.9% of comparable Treasuries and 30-year munis were at 97.6%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 108.2% of the comparable London Interbank Offered Rate.

The Treasury market showed some losses Friday. The benchmark 10-year note finished at 2.61% after opening at 2.55%. The 30-year bond finished at 3.80% after opening at 3.73%. The two-year note finished at 0.45% after opening at 0.41%.

In economic data released Friday, new orders for durable goods posted their biggest decline of 2010 in August, falling 1.3%.

Transportation orders fell 10.3%, pulled lower by a large drop in nondefense aircraft orders. Auto orders fell 4.4%. ­Excluding transportation, durable goods orders rose 2.0%, the strongest monthly gain in five months.

Economists expected durable goods to fall 1.0% in August and orders excluding transportation to increase 1.0%, according to the median estimate from Thomson Reuters.

New home sales remained near a record low in August as they held at a seasonally adjusted annual rate of 288,000 the second consecutive month.

The annualized sales pace recorded in August and July is the second-lowest on record. The lowest was May’s 282,000.

Economists expected 290,000 home sales for the month, according to the median estimate from Thomson Reuters.

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