NEW YORK – The California municipal market was flat to slightly firmer Tuesday amid light to moderate secondary trading activity, as 10-year munis reached a new record-low level of 2.51%.
“We’re a bit better,” a trader in Los Angeles said. “We’re probably better a good basis point or two.”
The Municipal Market Data triple-A scale yielded a record-low 2.51% in 10 years and 3.58% in 20 years Tuesday, following levels of 2.54% and 3.60% Monday. The scale yielded 3.91% in 30 years Tuesday, following 3.94% Monday.
Monday’s triple-A muni scale in 10 years was at 90.1% of comparable Treasuries and 30-year munis were at 98.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.4% of the comparable London Interbank Offered Rate.
The Treasury market was mixed Tuesday. The benchmark 10-year note was quoted recently at 2.77% after opening at 2.83%. The 30-year bond was quoted recently at 4.03% after opening at 4.01%. The two-year note was quoted recently at 0.53% after also opening at 0.53%.
The Federal Open Market Committee once again held its federal funds rate target unchanged at a 0% to 0.25% range, where it has remained since December 2008.
In a commentary, Guy LeBas, chief fixed income strategist at Janney Capital Markets, wrote “the non-decision was a non-surprise, even though in the period since the prior FOMC meeting, evidence of deteriorating conditions proved significant enough for Fed Chairman Ben Bernanke to declare that ‘the economic outlook remains unusually uncertain.’”
“That’s doesn’t mean ‘poor,’ mind you, just unclear,” LeBas wrote. “And what should be clear at this juncture? The U.S. financial system is barely a year out from a string of crisis that repeatedly threatened to collapse the financial system, the U.S. consumer is barely a year out from the biggest recession in three quarters of a century, and U.S. firms aren’t sure whether to hire, fire, or just throw up their hands in desperation.”
In economic data released Tuesday, U.S. nonfarm productivity unexpectedly decreased 0.9% in the second quarter of 2010, the first decline in six quarters.
Unit labor costs increased 0.2% for the quarter ending June 30, the first increase in a year as hourly compensation fell.
Economists expected productivity to increase 0.2% for the quarter and for unit labor costs to increase 1.5%, according to the median estimate from Thomson Reuters.
Wholesale inventories increased 0.1% in June as wholesale sales declined for the second month in a row.
Wholesale sales dropped 0.7% following a 0.5% decrease in May. Sales had increased for 15 consecutive months going back to March 2009 before May’s decrease.
June inventories increased by the smallest amount since January. Inventories in May increased 0.5%, unrevised from last month’s report.
Economists expected wholesale inventories to increase 0.4% and for sales to increase 0.5%, according to the median estimate from Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was insured Chico Redevelopment Agency 5s of 2030, which traded 57 times at a high of 99.000 and a low of 95.232.
