NEW YORK – The California municipal market was unchanged to slightly firmer Friday amid fairly light secondary trading activity.
Traders said tax-exempt yields were mostly flat, but with gains of one or two basis points on the long end.
“There are some gains, mostly on the long end,” a trader in Los Angeles said. “We’re better as much as maybe three basis points out long.”
The Municipal Market Data triple-A 10-year scale dipped three basis points Friday to 3.31%, the 20-year scale declined two basis points to 4.56%, and the scale for 30-year bonds fell two basis points to 4.78%.
Friday’s triple-A muni scale in 10 years was at 99.4% of comparable Treasuries and 30-year munis were at 105.5%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 112.5% of the comparable London Interbank Offered Rate.
Treasuries showed gains Friday. The benchmark 10-year note was quoted recently at 3.33% after opening at 3.39%. The 30-year bond was quoted recently at 4.53% after opening at 4.56%. The two-year note was quoted recently at 0.56% after opening at 0.58%.
In economic data released Friday, the U.S. economy expanded at a faster annual pace in the fourth quarter, growing 3.2% due to the stronger consumer spending.
Consumer spending, which accounts for about 70% of gross domestic product, rose 4.4% during the three-month period ended Dec. 31 — the largest gain since the first quarter of 2006. Consumption of durable goods was up 21.6%.
Meanwhile, inflation slowed to a new record. Personal consumption expenditures excluding food and energy goods, the Federal Reserve’s preferred inflation measure, rose just 0.4% — the smallest gain since record-keeping began in 1959.
Core PCE rose 0.5% in the third quarter. That compares with a 2.8% gain for the inflation gauge in the fourth quarter of 2007, near the start of the recession.
Economists expected GDP to increase 3.6% for the quarter, according to the median estimate from Thomson Reuters. The third quarter GDP expanded 2.6%.
Consumer sentiment fell in January, dropping to 74.2 from a prior-month reading of 74.5 in the Thomson Reuters/University of Michigan report released Friday.
The decline was driven by concerns about rising prices. The current conditions index, a survey of consumers’ willingness to buy big-ticket items, dropped to 81.8 from 85.3 in December.
The index of consumer expectations, a survey of future consumer expectations, increased to 69.3 from 67.5 in December. Consumers expressed optimism about employment growth. Just 22% of respondents said they think the unemployment rate will increase in 2011, the lowest level in more than a decade.
Consumers also said they were worried about inflation diminishing their financial prospects.
An employment index used to track overall labor costs rose 0.4% for the final three months of 2010 on a seasonally adjusted basis, matching the growth rate recorded in the prior quarter.
The fourth-quarter gain was lower than the 0.5% uptick economists expected, according to Thomson Reuters.
Previous Session's Activity
The most actively traded security in the state yesterday was Newport Beach 5.875s of 2030, which traded 294 times at a high of par and a low of 98.950.
