The municipal bond market ended the first week of April on a strong note as munis followed Treasuries higher on a weaker than expected employment report.
The March employment report released Friday morning showed a less than robust economy, with only 88,000 jobs added, about 100,000 less than economists had predicted. The unemployment rate fell to 7.6% from reduced labor force participation.
Treasuries rallied. The benchmark 10-year yield dropped six basis points to 1.70% and the 30-year yield plunged 12 basis points to 2.87%. The tow-year was steady at 0.23%.
Munis followed Treasuries higher. “Buyers bought everything this morning,” a New York trader said. “It was a crazy morning.”
The buying spree continued throughout the day. “I’m looking at offerings now and showing bids and it seems like everything is firm,” a Virginia trader said. “There is not a tremendous amount of activity or trades but those that are posting are strong.”
He added the muni rally is driven primarily from a firmer Treasury market. But, positive news out of Puerto Rico on passing pension reform helped support the market. “Puerto Rico was a bit of a headwind in terms of muni-specific issues but there have been a couple of decent headlines and Standard & Poor’s said it could be a credit positive so it’s a double whammy.”
In the secondary market, trades compiled by data provider Markit showed firming.
Yields on Hidalgo County, Texas, Drain District 5s of 2022 plunged seven basis points to 1.99% and Massachusetts School Building Authority 5s of 2029 dropped six basis points to 2.64%.
Yields on California 5s of 2038 dropped five basis points to 3.61% and Ohio’s Buckeye Tobacco Settlement Financing Authority 5.125s of 2024 fell three basis points to 6.10%.
Yields on Los Angeles Department of water and Power 5s of 2030 slipped two basis points to 2.81% and New York 5s of 2030 fell one basis point to 2.85%.
Municipal bond scales ended as much as 10 basis points Friday after posting gains Wednesday and Thursday.
Yields on the Municipal Market Data triple-A GO scale ended as much as 10 basis points lower. The 10-year yield plummeted nine basis points to 1.71% while the 30-year yield dropped 10 basis points to 2.93%. The two-year yield fell two basis points to 0.29% after trading steady at 0.31% for 32 consecutive sessions.
For the week, the 10-year MMD yield fell 20 basis points from 1.91% the previous Friday. The 30-year yield dropped 16 basis points from 3.09% the week before. The two-year yield fell two basis points from 0.31% at the end of the previous week.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended as much as nine basis points lower. The 10-year and 30-year yields fell nine basis points each to 1.79% and 3.05%, respectively. The two-year yield fell one basis point to 0.32% after trading steady at 0.33% for 27 sessions.
For the week, the 10-year MMA yield dropped 17 basis points from 1.96% the week prior and the 30-year yield slid 14 basis points from 3.19% the Friday before. The two-year fell one basis point from 0.33%.
