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Market Midday Post: Munis Fall As Desks Start Selling

The tax-exempt market continued to weaken Friday afternoon though traders said the selloff had less of an effect because it was a Friday with no supply in the primary.

“We have fewer bonds than other dealers because we got out a week ago,” a Chicago trader said. “But it’s absolutely weaker. Supply is minimized so we aren’t seeing the amount of damage that you would because it’s a Friday.”

He added the selloff stemmed from supply in the primary that hit the market earlier in the week, coupled with weaker Treasuries. Munis also look rich compared to their taxable counterparts.

“Ratios are awful and syndicates need and will continue to puke out bonds.”

Most reads on the municipal bond market showed weakening Thursday.

The Municipal Market Data scale ended slightly weaker Thursday. The 10-year and 30-year yields jumped two basis points each to 1.69% and 2.74%, respectively. The two-year finished steady at 0.33% for the sixth session.

The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed weakening. The 10-year yield rose two basis points to 1.72% while the 30-year yield increased one basis point to 2.82%. The two-year was steady at 0.34% for the eight consecutive trading session.

Treasuries continued to weaken Friday afternoon. The benchmark 10-year yield and the 30-year yield jumped nine basis points each to 1.94% and 3.13%, respectively. The two-year yield rose one basis point to 0.27%.

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