The municipal bond market ended a mixed week on a stronger note Friday despite traders noting activity was subdued with the March Madness tournament just beginning.
Municipal bonds scales were firmer at the beginning of the week, only to weaken mid-week and post gains again Friday.
“We’re backing out of the market,” a trader located in the Southwest region said. “We’re not bidding much because we’re trying to cut down on inventory. But it’s been pretty quiet ever since the tournament started.”
Other traders agreed the market was very quiet. “The market is dead,” a Chicago trader said.
In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.
Yields on Illinois Finance Authority 5s of 2042 dropped three basis points to 3.64% while Louisiana Local Government Environmental Facilities and Community Development Authority 5s of 2023 dropped two basis points to 2.77%.
Yields on Washington 3s of 2033 fell two basis points to 3.72% while Philadelphia water and wastewater 5s of 2041 slid one basis point to 3.45%.
Other trades were weaker. Yields on Boston 4s of 2028 and California 5s of 2038 rose two basis points each to 3.83% and 3.70%, respectively. Yields on New York’s Metropolitan Transportation Authority 5s of 2028 jumped two basis points to 3.22%.
Municipal bond scales ended as much as one basis point firmer Friday.
Yields on the Municipal Market Data triple-A GO scale ended one basis point stronger. The 10-year yield fell one basis point to 1.95% while the 30-year yield closed at 3.10% for the third consecutive session. The two-year finished flat at 0.31% for the 24th consecutive session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale also ended as much as one basis point lower. The 10-year yield and the 30-year yield slid one basis point each to 2.00% and 3.19%, respectively. The two-year held at 0.33% for the 19th straight session.
Treasuries were stronger Friday. The benchmark 10-year yield and the 30-year yield dropped one basis point each to 1.92% and 3.14%, respectively. The two-year was steady at 0.26%.
This week also saw the third consecutive week of outflows from bonds that report funds weekly to Lipper, and many think this is just the beginning.
“So far this month, municipal bond prices are falling and yields rising faster than other bond markets as pressure mounts due to investors taking money out of municipal bond funds,” wrote J.R. Rieger, vice president of fixed income at Standard & Poor’s Dow Jones Indices. “Signs of the start of the great rotation?”
Indeed for the month, the S&P National AMT-Free Muni Bond Index rose 19 basis points to 2.11% on March 21 from 1.92% on Feb. 28.
The S&P AMT-Free Muni Series 2022 Index jumped 13 basis points to 2.30% from 2.17%. The S&P AMT-Free Muni Series 2018 index spiked up 10 basis points to 1.22% on March 21 from 1.12% on Feb. 28.
