NEW YORK – The California municipal market was slightly weaker Friday amid fairly light secondary trading activity.
Traders said tax-exempt yields increased one to three basis points overall, ending a three-day string of firmness that began with the release of Tuesday’s Federal Open Market Committee statement.
“It’s largely quiet,” a trader in Los Angeles said. “It’s more or less a quiet finish to the week. However, we’re giving back some of the gains from earlier in the week. I don’t think we’re down more than two basis points or so, but we’re seeing some losses.”
The Municipal Market Data triple-A scale yielded 2.32% in 10 years Friday, one basis point higher than Thursday’s close, while the 20-year scale yielded 3.28%, equaling the record low matched Thursday. The scale for 30 year debt increased one basis point to 3.70%.
The weakening ends gains experienced since Tuesday. The three-day rally marks a reversal of the trend that marked the prior three weeks, in which muni yields rose from a series of record lows in late August.
Yields on the 10-year and 30-year triple-A scale bottomed out at 2.17% and 3.67%, respectively, on Aug. 25. The 20-year low of 3.28%, which was matched Thursday, was originally set Aug. 31.
Friday’s triple-A muni scale in 10 years was at 88.9% of comparable Treasuries and 30-year munis were at 97.6%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 108.2% of the comparable London Interbank Offered Rate.
The Treasury market showed some losses Friday. The benchmark 10-year note was quoted recently at 2.61% after opening at 2.55%.
The 30-year bond was quoted recently at 3.80% after opening at 3.73%. The two-year note was quoted recently at 0.45% after opening at 0.41%.
In economic data released Friday, new orders for durable goods posted their biggest decline of 2010 in August, falling 1.3% due to a dip in demand for transportation equipment, the Commerce Department reported Friday.
Transportation orders fell 10.3%, pulled lower by a large drop in nondefense aircraft orders. Auto orders fell 4.4%. Excluding transportation, durable goods orders rose 2.0%, the strongest monthly gain in five months.
Economists expected durable goods to fall 1.0% in August and expected orders excluding transportation to increase 1.0%, according to the median estimate from Thomson Reuters.
New home sales remained near a record low in August as they held at a seasonally adjusted annual rate of 288,000 the second consecutive month, the Commerce Department reported Friday.
The annualized sales pace recorded in August and July is the second-lowest on record. The lowest was May’s 282,000.
Economists expected 290,000 home sales for the month, according to the median estimate from Thomson Reuters.
Also, the Federal Reserve Bank of Philadelphia president Charles Plosser repeated his concern over the “unconstrained” flexibility that new monetary policy tools give to the central bank Friday.
He stressed the need to return the composition of the Fed’s balance sheet to Treasuries only and to reduce its size to pre-crisis levels.
Previous Session's Activity
The most actively traded security in the state yesterday was insured Coachella Redevelopment Agency 5.75s of 2021, which traded 80 times at a high of 96.078 and a low of 91.250.
