NEW YORK – The California municipal market was unchanged to slightly firmer Tuesday. Traders said tax-exempt yields were firmer by one or two basis points on the shorter end of the curve, with yields mostly flat out longer than 15 years.
“We’re picking up maybe a couple basis points in spots,” a trader in Los Angeles said. “I’m really not seeing any movement on the long end, we’re pretty flat out there. But in that 10-year range that has weakened quite a bit over the past week or so, we’re seeing probably a one or two basis point drop in yield today.”
The Municipal Market Data triple-A scale yielded 2.39% in 10 years and 3.33% in 20 years Tuesday, following 2.42% and 3.33% Monday. The scale yielded 3.72% in 30 years Tuesday, matching Monday.
Tuesday’s slight short-end firmness marked the first decline in yields in nine sessions, following seven consecutive sessions of rising yields to open September before Monday’s flatness.
Before the recent sell-off, yields dropped to all-time lows in 10-year munis 12 times in the prior 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established August 25. The 20-year low of 3.28% was set August 31.
Friday’s triple-A muni scale in 10 years was at 86.7% of comparable Treasuries and 30-year munis were at 96.1%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 106.3% of the comparable London Interbank Offered Rate.
The Treasury market was showed gains Tuesday. The benchmark 10-year note was quoted at 2.67% after opening at 2.75%.
The 30-year bond was quoted at 3.79% after opening at 3.85%. The two-year note was quoted at 0.50% after opening at 0.53%.
In economic data released Tuesday, retail sales increased 0.4% in August, the strongest gain in five months, topping economists’ estimates.
Excluding auto sales, retail sales increased 0.6%, also the largest increase since March. Excluding auto, gasoline and building material, retail sales increased 0.5% for the month.
Economists expected retail sales and sales excluding auto to each increase 0.3%, according to the median estimate from Thomson Reuters.
Business inventories increased 1.0% in July, twice as much as economists expected and the largest increase in two years.
Total business sales increased 0.7%, the largest increase in four months, following a 0.5% drop in June.
Inventories were up a revised 0.5% in June, originally reported as a 0.3% rise. Retail inventories increased 0.7% for the month following a 1.1% gain in June. Retail inventories excluding motor vehicles were flat for the month.
Economists expected business inventories would increase 0.5% for July, according to the median estimate from Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Sonoma County 6s of 2029, which traded 86 times at a high of 102.288 and a low of 98.473.
