Additional positive economic data released Thursday morning pushed prices lower and yields higher in municipal bonds, following Treasuries.
With most of the new issues priced earlier in the week, traders said the secondary market was weaker with light activity.
"I would call this the annual summer swoon," a New Jersey trader said. "There is just not a lot going on." In Thursday morning trading, the iShares National AMT-Free Municipal Bond Fund - ticker MUB - fell 0.20% to 103.48.
In the primary market, the largest deal is expected to come in the competitive market with Oyster Bay, N.Y., auctioning $189.1 million of bond anticipation notes.
Wednesday, yields on the Municipal Market Data scale ended flat. The 10-year and 30-year yields were steady at 2.67% and 4.20%, respectively. The two-year finished flat at 0.43% for the 11th consecutive session.
Yields on the Municipal Market Advisors scale ended as much as one basis point weaker Wednesday. The 10-year and 30-year yields rose one basis point each to 2.88% and 4.28%, respectively. The two-year was steady at 0.54% for the sixth session.
Treasuries were weaker on better-than-expected economic data released Thursday morning. The benchmark 10-year yield jumped nine basis points to 2.67% and the 30-year yield increased eight basis points to 3.72%. The two-year yield rose two basis points to 0.34%.
In economic news, initial jobless claims fell 19,000 to 326,000 for the week ending July 27, the lowest level since Jan. 19, 2008. Economists expected 345,000 claims.
"The surprise decline in jobless claims in late July may be little more than the usual seasonal volatility caused by summer factory shutdowns for retooling," wrote economists at RDQ Economics. "However, through the volatility, the four-week average of jobless claims has slipped to 341,250 for the month of July from 345,750 for the month of June. This report, although it covers a period outside the survey week for nonfarm payrolls, is yet another indicator that suggests the 200,000 per month trend in payrolls likely continued into July. The evidence of a sustainable improvement in labor market conditions continues to mount."
In other economic news, the Institute for Supply Management manufacturing index rose to 55.4 in July from 50.9 in June, beating economists' expectations of 52.0 for the index.
"This is a strong report that significantly beat expectations and was driven higher by strong gains in the core components of orders, production, and employment," RDQ economists said. "The July data thus far have generally been stronger than expected and we are comfortable with our view that payrolls rose by 200,000 in July and that the unemployment rate dropped to 7.5%. We also remain of the belief that the FOMC will announce a tapering of its bond purchases at the September 17-18 FOMC meeting."
