Market Post: Munis Appear Stronger on Light Trading

The municipal bond market adopted a stronger tenor out of the gate Friday morning on light activity.

A few bid-wanteds have surfaced in the secondary and some trades peppered the front end of the yield curve, a trader in New York said.

"It seems like there's a little better tone out there, but it's really quiet," she said. "There does seem to be some activity in the front end, as well. Some trades are getting done. But it doesn't feel as though there's a trend, or a sector, standing out."

Falling on the heels of a large calendar, estimates for next week's volume point to a lighter selection of new deals.

Several issues on the negotiated calendar top $100 million, led by Guggenheim Securities, which expects to price $283 million of Pennsylvania Economic Development Financing Authority parking revenue bonds for the Capital Region Parking System. A retail order period will be held Monday, followed by pricing on Tuesday.

RBC Capital Markets should price $141 million of Colorado Board of Governors State University System enterprise revenue bonds on Tuesday.

In the competitive market, Massachusetts is expected to auction $525 million of general obligation bonds, also on Tuesday.

Yields on the Municipal Market Data triple-A scale started Friday unchanged through 16 years on the curve. They were up to a basis point lower for maturities beyond 2029.

Muni yields ended Thursday flat for a second straight session, with the benchmark triple-A 10-year yield at 2.72%. The 30-year remained at 4.16%. The two-year held at 0.33% for a 20th straight session.

Yields on the Municipal Market Advisors benchmark triple-A scale weakened slightly on the long end of the curve Thursday. The 10-year and the two-year held at 2.75% and 0.36%, respectively. The 30-year yield ticked up one basis point to 4.40%.

Treasury yields are stronger to start Friday's session. The benchmark 10-year yield has dipped two basis points to 2.87%, while the 30-year yield has also fallen two basis points to 3.88%. The two-year yield has held at 0.33%.

In economic news, the Labor Department reported Friday that U.S. producer prices fell for a third consecutive month in November. Its seasonally adjusted producer price index dropped 0.1% as gasoline prices continued their downward trajectory.

Economists' estimates maintained wholesale prices for November would be unchanged. Prices farms, factories and refineries reported that prices had dipped 0.2% in October.

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