After four consecutive sessions of weakening, the tax-exempt market opened calmer Thursday morning as Treasuries rallied, providing some relief to munis.
"The market is quiet which must be a relief after the cuts all week," a New York trader said. "It feels calmer. Treasuries are up so maybe, unlike Wednesday, munis will follow them."
The majority of the new issue market was priced earlier in the week, but the last remaining large deal should price later Thursday.
Morgan Stanley is expected to price $877 million of Rutgers University bonds, including $339.3 million of tax-exempt general obligation refunding bonds, $138 million of taxable GO refunding bonds, and $399.7 million of GOs. The bonds are rated Aa3 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.
Wednesday, yields on the Municipal Market Data scale ended as much as six basis points higher. The triple-A two-year and 10-year yields rose one basis point each to 0.31% and 2.27%, respectively. The 30-year yield increased three basis points to 3.52%.
Muni yields on the Municipal Market Advisors 5% scale closed as much as four basis points higher. The 10-year yield climbed three basis points to 2.33% and the 30-year yield rose four basis points to 3.61%. The two-year ticked up one basis point to 0.39%.
Treasuries were stronger Thursday morning as stocks fell. The benchmark 10-year and 30-year yields slipped three basis points each to 2.20% and 3.34%, respectively. The two-year was steady at 0.33%.
In economic news, initial jobless claims fell 12,000 to 334,000 for the week ending June 8, a level far below the 350,000 expected by economists.
"The decline in the four-week average of initial claims to below 350,000 reassures us that the rise in jobless claims in May was no more than a statistical blip and we believe these data support our view that the labor market is on an improving trend," wrote economists at RDQ Economics. "The level of jobless claims suggest that the pace of layoffs remains fairly subdued and that layoffs are not an impediment to job growth."
In other economic news, retail sales climbed 0.6% to $421.1 billion in May, stronger than the expected 0.4% increase.
"Underlying retail sales remain on a moderate upward track in the second quarter," RDQ economists wrote. "We estimate that real PCE growth in the second quarter is on track for a gain of 2.5% to 2.75%, which is about a half percentage point faster than appeared to be the case before today's report. We believe consumers are benefiting from the tax-cut effect of lower energy prices and a continued strengthening in the labor market, as well as the wealth effects from rising equity and home prices."
