NEW YORK – The California municipal market was mostly unchanged Thursday amid light to moderate secondary trading activity, pausing a string of record-low tax-exempt yields.
The flatness follows Wednesday’s rally, which dropped muni yields to all-time lows for the 12th time in the past three weeks, pushing 10-year tax-exempt yields below 2.20% and 30-year munis lower than 3.70% for the first time in history.
“I guess yields can’t go lower every single day,” a trader in San Francisco said. “There just wasn’t a ton trading and nothing really weighing on munis to push those yields lower. The tone is still firm, of course, but we’re just flat today.”
The Municipal Market Data triple-A scale yielded record lows of 2.17% in 10 years and 3.30% in 20 years Wednesday, following record lows of 2.17% and 3.30% Wednesday. The scale yielded 3.67% in 30 years Thursday, matching Wednesday’s all-time low of 3.67% Wednesday.
Wednesday’s levels marked the 12th all-time low in 10-year munis set in the past 14 sessions. Also, 20- and 30-year tax-exempts reached record lows for the fourth time in five sessions.
Thursday’s triple-A muni scale in 10 years was at 86.8% of comparable Treasuries and 30-year munis were at 104.0%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 116.5% of the comparable London Interbank Offered Rate.
The Treasury market mostly showed some gains Thursday. The benchmark 10-year note was recently at 2.50% after opening at 2.54%.
The 30-year bond was recently quoted at 3.54% after opening at 3.57%. The two-year note was at 0.53% after opening at 0.52%.
The Treasury Department auctioned $29 billion of seven-year notes, with a 1 7/8% coupon, a 1.989% high yield, a price of 99.26. The bid-to-cover ratio was 2.98. The Federal Reserve banks bought $710.0 million for their own account in exchange for maturing securities.
The iShares S&P National AMT-Free Bond Fund slipped 7 cents this afternoon, to $107.13. The $2.16 billion fund, which seeks to replicate returns on the S&P National AMT-Free Municipal Bond Index, has returned 8% this year, including 2.2% in August.
Activity in the California new-issue market was light Thursday.
In economic data released Thursday, initial jobless claims decreased 31,000 to 473,000 for the week ending Aug. 21, dropping for the first time in four weeks.
Continuing claims fell to 4.456 million, the lowest level since June.
Economists expected 500,000 initial claims and 4.478 million continuing claims, according to the median estimate from Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was Sonoma County taxable 6s of 2029, which traded 196 times at a high of 103.250 and a low of 98.706.
