Market Close: Munis End Week With Firm Bias

The tax-exempt market ended the week with a stronger bias, though activity started to slow by afternoon as the focus turned to the Boston manhunt.

Traders said throughout the week that primary deals were well received and the market ended stronger than expected given the uptick in supply.

“It’s been on the lighter side but it’s very firm,” a Virginia trader said Friday. “It’s been back-to-back weeks of healthy supply but still order periods are seeing bumps.” He suggested that people were more nervous about elevated supply than they needed to be.

“The deals we participated in saw strong flows, oversubscriptions, and deals went exceptionally well. I thought after last week the market had its hands full, but really now for two weeks with elevated supply the market has done better than expected.”

Other traders said the market was firm and trading was active Friday morning. “There is a firmer tone,” a New Jersey trader said. “The primary deals came in cheap and were well received and now the bid side is firm on those. But the secondary is well-focused and well-distributed and the bid sides are up.”

In the secondary market, trades compiled by data provider Markit showed a mix of strengthening and weakening.

Yields on Allegheny County, Pa., Hospital Development Authority 5s of 2020 fell three basis points to 1.66%.

Yields on New Jersey Environmental Infrastructure Trust 5s of 2028 and Austin Community College District 4s of 2024 dropped one basis point each to 1.83% and 2.31%, respectively.

Still, other trades were weaker. Yields on New York’s Metropolitan Transportation Authority 5s of 2042 jumped seven basis points to 3.73%, and Ohio’s Buckeye Tobacco Settlement Financing Authority 5.875s of 2047 rose three basis points to 6.70%. Yields on Graham, Texas, Independent School District 5s of 2020 increased one basis point to 1.33%.

Municipal bond scales ended a mixed week one basis point softer. Munis were stronger throughout most of the week.

Yields on the Municipal Market Data triple-A GO scale ended as much as one basis point higher. The 30-year yield rose one basis point to 2.90%. The 10-year yield finished flat at 1.70% for the third session and the two-year closed steady at 0.29% for the 11th session.

Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale also ended as much as one basis point higher.

The 10-year yield increased one basis point to 1.77%. The 30-year closed flat at 3.02% for the second session and the two-year was flat at 0.32% for the 11th session.

Treasuries ended slightly weaker Friday. The benchmark 10-year yield increased two basis points to 1.71% and the 30-year yield rose one basis point to 2.88%. The two-year was steady at 0.23%.

And despite recent outflows — this week posted $535 million of outflows from bonds that report weekly — the muni market has turned in positive performance. The S&P National AMT-Free Muni Bond Index is up 1.25% year to date and is up 0.91% so far in April.

The five- to 10-year range has seen some of the strongest outperformance as yields in the five-year S&P AMT Free Muni Series 2018 Index have fallen 11 basis points in April to return 1.22% year-to-date, according to J.R. Rieger, vice president of fixed-income at S&P Dow Jones Indices. Yields on the 10-year 2023 Index fell 26 basis points to return 2.24% year-to-date.

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