NEW YORK – The California municipal market was mostly weaker Thursday, with 10-year tax-exempt yields backing up roughly eight basis points, amid light to moderate secondary trading activity.
“We’re probably down a good three to five basis points overall, but 10-year yields could be off as much as eight basis points,” a trader in Los Angeles said. “It’s definitely a weaker feel out there today. There isn’t a whole lot of movement on the long end, but it’s a weaker market.”
The Municipal Market Data triple-A scale yielded 2.40% in 10 years and 3.33% in 20 years Wednesday, following 2.32% and 3.33% Tuesday. The scale yielded 3.72% in 30 years Wednesday, matching Tuesday.
Tax-exempts have now opened September with an uptick in yield in at least one of the three maturities the first six sessions of the month after doing so just once the entire month of August.
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.
Thursday’s triple-A muni scale in 10 years was at 86.4% of comparable Treasuries and 30-year munis were at 96.5%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 109.7% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Thursday. The benchmark 10-year note was quoted at 2.76% after opening at 2.60%.
The 30-year bond was quoted at 3.84% after opening at 3.66%. The two-year note was quoted at 0.57% after opening at 0.47%.
The Treasury Department Thursday auctioned $13 billion of 30-year with a 3 7/8% coupon at a 3.820% high yield, a price of 100.97. The bid-to-cover ratio was 2.73. The Fed banks also bought $140.6 million for their own account in exchange for maturing securities.
Trades reported by the Municipal Securities Rulemaking Board Thursday showed losses. A dealer sold to a customer taxable California BABs 7.5ss of 2039 at 6.92%, two basis points higher than where they were sold Wednesday. Bonds from an interdealer trade of taxable California’s Sonoma County 6s of 2039 at 6.11%, up one basis point from where they were sold Wednesday.
In economic data released Thursday, initial jobless claims decreased to 451,000 for the week ending Sept. 4.
Continuing claims for the week ending Aug. 28 also fell to 4.478 million.
The figures came in below the expectations of economists, who projected 470,000 initial claims and 4.450 million continuing claims, according to the median estimate from Thomson Reuters.
Activity in the California new-issue market was light Thursday.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable Sonoma County 6s of 2029, which traded 78 times at a high of 102.289 and a low of 99.600.
