Market Post: Munis Weaken Ahead of August Reinvestment

The tax-exempt market weakened Monday afternoon as munis took direction from Friday's weaker Treasuries. The market started to drift away from record low yields set last with as there were no major pricings of new deals and August reinvestment money has yet to hit the market.

"Everyone was expecting the market to be weaker given what happened Friday in Treasuries," a trader located in the Southwest region said. "But, syndicates are firm and they are better than other pricings. It's slow from a retail standpoint, but there is still business going on. There is August 1 money coming in and supply is not overwhelming so no one is going to panic here."

Munis were weaker from morning trading, according to the Municipal Market Data scale. Yields inside six years were steady while yields on the nine- to 22-year rose as much as two basis points. Outside 23 years, yields were flat.

On Friday, munis weakened, breaking a 24-session streak of steady to firmer munis. The two-year yield held steady at 0.29%. The 10-year jumped four basis points to 1.64%, finishing above its record low of 1.60% set Thursday. The 30-year yield climbed five basis points to 2.84%, finishing off its record low of 2.79% set Wednesday.

Treasuries continued to strengthen across the curve. The benchmark 10-year yield fell three basis points to 1.52% while the 30-year yield dropped four basis points to 2.59%. The two-year yield fell two basis points to 0.24%.

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