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Market Post: Munis Stronger Despite Limited Activity

The tax-exempt market opened Thursday morning on a steady to stronger note, though traders said activity has been relatively quiet all week.

"It's a little stronger today," a New York trader said. "You can hold your bid and people are hitting that. I came down an eighth of a tick to get some flow going but for the most part people are holding tight on prices. But there is not a whole lot going on. It's definitely flat to up slightly but your justification is only from a few trades that have gone on."

He added that activity has been relatively muted all week. "It's been a quiet week. There are a few bits and pieces but it's very spotty. There are large gaps in between trades."

While the focus has been on the secondary market for most of the week, the few primary deals that hit the market were well received. "Deals are definitely being received well and people are hungry for paper at the right levels," the trader said. "But there are a few deals that sat out there with the same names and the same offerings in the last few weeks. We could use another big deal to swoop in."

In the primary market Thursday, JPMorgan is expected to price $170.5 million of Michigan Finance Authority state revolving fund revenue bonds, rated AAA by Standard & Poor's and Fitch Ratings.

In the competitive market, Santa Clara County, Calif., is expected to auction $490 million of general obligation bonds.

The Virginia Public Building Authority should auction $215.8 million of revenue bonds, rated Aa1 by Moody's and AA-plus by Standard & Poor's.

Municipal bond market reads showed steady to stronger trading after losses on Tuesday.

Yields on the Municipal Market Data triple-A GO scale finished steady. The 10-year yield closed steady at 1.81% for the third session while the 30-year yield held flat at 2.86% for the second session. The two-year closed at 0.34% for the eighth session.

The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed steady to lower yields. The 10-year yield held steady at 1.84% for the sixth consecutive trading session while the 30-year yield closed flat at 2.95% for the second time. The two-year closed unchanged at 0.35% for the eighth session.

Treasuries were steady Thursday morning after posting gains Wednesday. The benchmark 10-year yield and the 30-year yield were flat at 1.97% and 3.18%, respectively. The two-year opened flat at 0.26%.

In economic news, seasonally adjusted initial jobless claims fell 5,000 to 366,000 for the week ending Feb. 2. Continuing claims rose 8,000 to 3.224 million for the week ending Jan. 26.

"The four-week average of initial jobless claims has fallen in late January to the lowest level since March 2008," wrote economists at RDQ Economics. "If this decline is sustained, the claims data would suggest some slowing in the pace of job cuts."

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