Municipals opened slightly weaker on Thursday morning, while traders reported an increase in bid-wanted lists from investors shopping for year-end bargains.
"It's softer today, but that's kind of what we need right now to bring that investor back in because he's not too thrilled about rates," said a New York trader Friday morning.
He said volume was down over 20% compared to Wednesday, and there are no major negotiated deals scheduled for pricing Thursday heading into what traders believe is will be full holiday mode by tomorrow.
"Today it's quiet, with just a little bit of action here and there," he said. "It's weaker but there's some bids flying around because people are trying to buy things cheaper than where they are."
He said he has witnessed a "massive" amount of bid wanted lists over the last two days.
News of steady oil prices Thursday morning further supported the market's already weak tone, and could translate in a three-to-five basis point cut in long municipals by the day's end, another New York trader said.
Meanwhile, the markets continued to react to Wednesday's announcement by Federal Reserve Board chair Janet Yellen that the central bank may not raise rates until mid-2015.
Municipals in 30 years opened at a 2.87% on Thursday morning, after inching up one basis point on Wednesday, while the 10-year was at 1.99% after rising three basis points the prior day, according to Municipal Market Data.
The 30-year Treasury yield, meanwhile, was up eight basis points at a 2.82% -- the highest in 17 months -- while the 10-year was up seven basis points at 2.21%. The two-year was at 0.64% after inching up two basis points Thursday morning, according to Bloomberg.
"You are giving up a little here and there to move trades, especially with the holiday coming up," the first New York trader said.
Dealers are struggling to sell paper before the market takes a hiatus for the Christmas holiday next week, the second New York trader said.
"The Street is somewhat heavy," he said, adding that both trading volume and liquidity are down - yet heavy bid wanted lists are slowly starting to unwind.
He said investors could reap the benefits of sellers who surface in the next couple of days looking to balance their books at year end.
