NEW YORK - The California municipal market was slightly weaker Wednesday, lagging a Treasury sell-off, as moderate activity persisted in the secondary.
"Treasuries are off quite a bit, and we're following suit somewhat, though it's muted," a trader in Los Angeles said. "People are buying at only slight concessions really, and those that need to get deals done are getting them done. Overall, I'd say we're down two or three basis points, depending on the credit quality and maturity."
The Municipal Market Data triple-A scale yielded 2.80% in 10 years Wednesday, one basis point higher than Tuesday's 2.79%, while the 20-year scale yielded 3.97%, up three basis points from Tuesday. The scale for 30-year debt also rose three basis points, to 4.31% from Tuesday's 4.28%.
Wednesday's triple-A muni scale in 10 years was at 94.6% of comparable Treasuries and 30-year munis were at 101.7%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 108.8% of the comparable London Interbank Offered Rate.
The Treasury market was weaker across the board Wednesday. The benchmark 10-year note was quoted recently at 2.99% after opening at 2.80%. The 30-year bond was quoted recently at 4.25%, after opening at 4.11%. The two-year note was quoted recently at 0.55% after opening at 0.45%.
Activity in the California new-issue market was light Wednesday.
In economic data released Wednesday, the U.S. manufacturing sector expanded for the 16th consecutive month in November, according to the Institute for Supply Management's report on business.
The ISM index dipped less than economists predicted, falling to 56.6 in November from 56.9 in October. Economists polled by Thomson Reuters predicted a reading of 56.2.
Construction spending unexpectedly surged 0.7% in October, aided by a strong gain in residential construction.
Economists expected a 0.4% decline in construction spending. September construction spending was revised upward to a 0.7% increase from the 0.5% rise initially reported last month.
The productivity of U.S. workers rose at an annual rate of 2.3% in the third quarter as output and hours worked increased.
The productivity gain was revised upward from the 1.09% increase initially reported for the third quarter. Productivity has been volatile this year, falling 1.8% in the second quarter after expanding 3.9% in the first quarter.
Unit labor costs, a ratio of hourly compensation to productivity, were unchanged from initial estimates at a 0.1% dip. They rose 4.9% in the second quarter. Economists expected a 2.3% gain in productivity and a 0.4% drop in unit labor costs.
Previous Session's Activity
The most actively traded security in the state yesterday was taxable California BABs 7.7s of 2030, which traded 328 times at a high of 105.031 and a low of 101.106.
