Lack of new issue volume and concerns over how a government shutdown may affect an upcoming debt ceiling debate kept the municipal market a slow pace on Thursday.
“You can’t really look at economic data because sources are shut down due to the governmental impasse,” said one trader in the Southwest region. “It’s definitely slower than it was yesterday and Tuesday, but it’s not like activity’s completely dropped off.”
Employment data scheduled to be released Friday was postponed indefinitely due to the government shuttering, the Labor Department announced Thursday. The report, when released, will give the current unemployment rate, average hourly earnings and nonfarm payroll updates.
“There’s not a lot of offering in terms of deals to look at,” a trader in New York said. “Where people are still trading, there’s some interest in the front end of the curve.”
As the U.S. government continues its third day in a shutdown, most traders agreed that the stalemate was at very least uninspiring to investors.
“As long as you have this backdrop of government shutdown, people are kind of just watching,” said another trader based in New York.
One trader wasn’t so sure, saying he doubted the congressional impasse had anything to do with slow activity Thursday, instead attributing the relative silence to lack of new issue.
For the week ending Oct. 2, odd lot trades of under 100 bonds, tracked by BondDesk Group, showed investor buy transactions rose to 77,357, from 76,485 last week. Buy trade volume was lower than the previous four weeks, with par value falling to $1.967 billion from $1.974 billion the week before.
Sell trades dropped to their lowest since the week ending Sept. 4, sliding to 34,228 from 39,523 the previous week. Par value fell to $935 million, the lowest in four weeks, from $1.092 billion.
The ratio of buy to sell trades rose to 2.3 from 1.9 in the previous week, on pace with the ratio seen in the week ending Sept. 18. In par value, the buy to sell ratio increased to 2.1 from 1.8 the previous week.
Ramirez & Co. priced for retail $575 million of Connecticut general obligation bonds, rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s, Fitch Ratings and Kroll Bond Ratings.
“Away from Connecticut, there’s really not a whole lot out there,” a New York trader said.
Institutional pricing for $560 million of the Connecticut GOs included the addition of a 5% coupon bond with a maturity in 2026, a yield of 3.17% and an option to call in 2020. Yields ranged from 0.71% with 3% and 4% coupons maturing in 2016 to 3.56% with a 5% coupon in 2027.
The yields on the 3% and 4% coupons maturing in 2016 were two basis points lower than in preliminary pricing. Yields on bonds with maturities between 2018 and 2019 were lowered two basis points from preliminary pricing, while yields on bonds maturing from 2020 to 2022 were two basis points higher. All the bonds are callable at par in 2023.
Yields on the triple-A Municipal Market Data scale were mostly unchanged Thursday, with yields dropping as much as one basis point on bonds maturing in 2019, and from 2026 to 2029.
Yields on the MMA 5% AAA benchmark scale were unchanged across the board.
In the secondary market, traders compiled by data provider Markit showed strengthening. Yields on Georgia Tech facilities refunding revenue 5s of 2025 slid four basis points, while yields on Hamilton County, Tennessee GO 4s of 2020 fell three basis points.
In other economic news, initial jobless claims rose 1,000 to 308,000 in the week ended Sept. 28. The four-week average of 305,000 is the lowest since the week of May 26, 2007, and its fifth straight decline, the Labor Department reported Thursday.
Treasuries ended Wednesday unchanged amid a third day of a government shutdown and rising jobless claims ahead of an impending debt ceiling debate later this month.
The benchmark 10-year yield remained at 2.62%. Two-year yields stayed at 0.33%, while 30-year yields remained steady at 3.71%.
Earlier in the day, the 10-year slipped to 2.61%, the lowest level for the benchmark treasury since Aug. 8.
The Bond Buyer’s Revenue Bond Index, which measures 30-year revenue bond yields, was unchanged this week, at 5.17%. It remains at its lowest level since Aug. 8, when it was 5.05%.
Top U.S. banking executives from Goldman Sachs and Bank of America Corp. met with President Barack Obama and Treasury Secretary Jacob Lew on Wednesday, discussing long-term ramifications of the government shutdown and the potential impact of a default. The banking leaders warned of serious repercussions should the debt limit not be lifted.
The municipal bond market received good news on tax collection data for September, S&P Dow Jones Indices said in a report Thursday.
“The Census Bureau data continues to show positive tax collection trends, which are important for the underlying health of the municipal bond market,” the report said.
While property tax collection growth, which is critical for local municipalities, continued to be slow, first and second-quarter collections in 2013 grew 2.8% and 1.9%, respectively, according to the report.
