NEW YORK – The California municipal market was largely flat Friday amid fairly light secondary trading activity, as long muni yields dipped back below long Treasuries after two sessions at over 100% of Treasury yields.
A Los Angeles trader said Friday’s market was “very quiet and unchanged.”
“There’s very little activity today,” the trader said. “The markets have had a long run. The Treasury markets seem to be coming back a little bit. Munis still seem to be stable. There is not a lot of supply on the forward calendar. We expect the market to be may be slowly grind a little bit higher next week.
The Treasury market showed some losses Friday. The benchmark 10-year note was quoted recently at 2.99% after opening at 2.95%. The 30-year bond was recently quoted at 4.02% after opening at 3.95%. The two-year note was recently quoted at 0.59% after opening at 0.56%.
The Municipal Market Data triple-A scale yielded 2.57% in 10 years and 3.67% in 20 years Friday, matching levels of 2.57% and 3.67% Thursday. The scale yielded 3.97% in 30 years Friday, matching 3.97% Thursday.
Friday’s triple-A muni scale in 10 years was at 86.0% of comparable Treasuries and 30-year munis were at 99.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 105.6% of the comparable London Interbank Offered Rate.
The credit is rated AA by Standard & Poor’s.
The economic calendar was light Friday.
Guy LeBas chief fixed income strategist at Janney Capital Markets wrote in a commentary that the last week “was a quiet one on the economic front, but a busy one in terms of interpretation.”
“Fed Chairman Ben Bernanke issued his twice-annual monetary policy testimony to Congress, replete with discussions of economic uncertainty in the coming months and years,” he wrote. “As always, the central question is ‘recovery or double dip?’ Our answer to that question is ‘no.’ Maybe you can’t have it both ways, but you can have it neither, and as the US transitions into the new normal, that’s what we will have.”
LeBas also wrote that “the big news out for this coming week is second quarter gross domestic product, which we anticipate will preview rather effectively trends that will be in place for years.”
“Over the course of the second quarter, our optimism has slowly waned as data have pointed towards growth tracking at a progressively slower level,” he wrote. “Ini¬tial forecasts had a 3.0% annualized expansion baked into the cake, but since that point we’ve cut to 2.4% as of the beginning of the month and even further to 2.2% today. Economic output growth of that relatively low magnitude, if sustained as we expect, has disappointing implications for long term returns in the capital markets, both debt and equity, returns which are being compounded by greater savings rates from US consumers.”
Activity in the California new-issue market was light Friday.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Monrovia, Calif., 6.625s of 2020, which traded 137 times at a high of 100.954 and a low of 98.704.
