The tax-exempt market saw a pickup in activity Friday afternoon as traders said year-end positioning of bonds helped the market trade firmer.
"There is definitely a firmer tone today," a New Jersey trader said. "We've sold a fair amount of bonds today and I'm sort of surprised."
He added he cut offerings just slightly in the morning to get out of positions he had held for a while. "And surprisingly, we've sold way more than I thought."
Year-end positioning, along with firmer Treasuries on fiscal cliff fears, is helping move the market. "There are a fair amount of bids from institutional clients. People are still putting money to work. It's not totally unexpected as some people like to be fully vested at year-end."
Data from the Municipal Securities Rulemaking Board showed trading is extremely quiet. On Monday, 14,184 trades occurred, down from the 30-day average of 42,136 trades. In par amount, $4.747 billion of trades were made, down from the 30-day average of $12.138 billion.
Activity picked up slightly on Wednesday. There were 32,085 trades, down from the 30-day average of 43,144. In terms of par amount, $6.284 billion was traded, about half of the 30-day average of $12.359 billion.
And Thursday saw the most action. Over 35,000 trades took place, close to the 30-day average of 42,731. And $7.56 billion in par amount was traded, more than half of the 30-day average of $12.259 billion.
Odd-lot trades - or those trades under 100,000 bonds - were also down significantly this week, according to data from BondDesk Group. The ratio of "buy" trades to "sell" trades was down to 1.5 from 1.9 the week before. It was also lower than in the previous five weeks.
Looking at the numbers more specifically, there were 40,618 buy trades and 26,252 sell trades. That is down from 76,054 buy trades the week before and 42,423 sell trades the previous week.
In terms of volume traded, the ratio of buy to sell trades was down to 1.4 from 1.7 the week before. There was $1.13 billion in buy trades versus $798 million sell trades. That is down from $2.2 billion buy trades and $1.3 billion sell trades the previous week.
The Municipal Market Data scale ended firm Thursday. The 10-year yield fell three basis points to 1.74%. The 30-year yield was steady at 2.83% for the fourth session while the two-year closed flat at 0.31% for the seventh consecutive session.
Treasuries continued to gain Friday afternoon. The two-year yield fell one basis point to 0.26% while the 30-year yield dropped two basis points to 2.88%. The benchmark 10-year yield was steady at 1.72%.
In next week's primary market, $161.3 million of tax-exempt bonds are expected to come to market, up from this week's revised $14 million. In negotiated deals, $156.9 million of bonds are expected to hit the market, up from this week's revised $14 million. On the competitive calendar, $4.4 million is expected, up from no reported deals this week.
