The tax-exempt market traded on a slightly firmer note Wednesday morning after two trading sessions of rising yields triggered by oversupply in the market.
"Munis are sluggish," a New York trader said. "This muni rally is making people proud of their bonds again but it's probably short lived. There is a lot of supply in the street."
In the primary, Bank of America Merrill Lynch should price $200 million of Higher Education Student Assistance Authority of New Jersey student loan revenue bonds. The bonds are rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.
Yields on the Municipal Market Data triple-A GO scale finished higher beyond the front end of the curve Tuesday. The 10-year yield climbed two basis points to 1.83%. The 30-year yield rose three basis points 2.98%. The two-year held steady at 0.28%.
The Municipal Market Advisors 5% scale also showed yields rising Tuesday. The 10-year and 30-year yields each moved up three basis points to 1.89% and 3.10%, respectively, on the day. The two-year yield held steady at 0.33% for a fourth consecutive session.
Treasuries were slightly stronger Wednesday morning after two trading sessions of losses. The benchmark 10-year and 30-year yields fell two basis points each to 1.94% and 3.15%, respectively. The two-year yield slid one basis point to 0.25%.
In economic news, April producer price index fell 0.7% while the core index rose 0.1%.
"This is a very tame inflation report that underscores the near-term price relief for the U.S. economy from lower energy prices," wrote economists at RDQ Economics. "However, there are no signs of a slowing in underlying inflation as core finished goods prices have been rising steadily at a rate of around 1.7% both over the last three months and over the last year. Lower food and energy prices should provide the consumer with a modest near-term real income boost, which could support discretionary spending. Pipeline prices suggest that there is nothing troubling around the corner for wholesale price inflation."
In other economic news, industrial production slipped 0.5% in April after rising a revised 0.3% in March.
"The expansion in manufactured production has slowed to a crawl on balance over the last three months," RDQ economists said. "Industrial production has fared better, but this is largely due to heating demand due to an unusually cold late-winter/early-spring. Manufacturing activity in the latest month was weak as output declined for consumer goods, capital equipment, and construction supplies."
