Market Post: Muni Trading is Slow As Summer Doldrums Set In

The tax-exempt market was showing signs of slowing Thursday morning as traders said the market was started to feel like a typical slow summer day.

"It's lackluster today," a Chicago trader said. "High-grades are trading on or near the curve, but everything else is complacent. There are not a lot of people paying attention. Seems like a really quiet August summer day."

Munis were steady Thursday morning, according to the Municipal Market Data scale. On Wednesday, the 10-year tax-exempt yield held steady at 1.66% for the third consecutive session, closing above its record low of 1.60% set July 26. The two-year was steady at 0.29% for the fifth consecutive session. The 30-year muni yield rose one basis point to 2.85%, finishing six basis points above its record low of 2.79% set July 25.

Treasuries were stronger after the Fed and the ECB each failed to take any immediate action to spur the American and European economies, respectively. The benchmark 10-year yield fell four basis points to 1.49% while the 30-year yield dropped three basis points to 2.57%. The two-year yield fell one basis point to 0.23%.

In the primary market, Goldman, Sachs & Co. is expected to price for institutions $1.15 billion of Triborough Bridge and Tunnel Authority - known formally as MTA Bridges and Tunnels - general revenue refunding bonds, following a retail order period Wednesday. The bonds are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

In the competitive market, the Missouri Board of Public Buildings is expected to auction $307.7 million of revenue bonds.

In economic news, initial jobless claims rose 8,000 to 365,000 for the week of July 28, compared to analyst expectations of an increase 369,000.

Continuing claims fell 19,000 to 3.272 million for the week of July 21, the lowest level since the 3.259 million claims in the week of May 19.

"Through the usual July volatility in initial jobless claims, which the Labor Department says should have now passed, the four-week average of claims has drifted lower since the June employment survey week," wrote economists at RDQ Economics. "The jobless claims data do not point to a pickup in the pace of job losses this summer. Tomorrow's employment report will provide information on both job losses and hiring in July - our concern on the labor market and the pace of net job creation for the second half of 2012 is that the large tax hike the economy faces under current law in 2013 will constrain the willingness of companies to hire."