Municipal bonds were stronger in early activity, traders said, as the shaky economic situation in China once again severely depressed U.S. stock prices and pushed Treasuries higher.
The yield on the 10-year benchmark muni general obligation weakened one to three basis points from 1.77% on Wednesday, while the 30-year muni yield was weaker by one to three basis points from 2.70%, according to an early read of Municipal Market Data's triple-A scale.
For the second time in a week, it was all about China. Circuit-breakers kicked in and halted trading in stocks on the China mainland, this time after only about half an hour of activity after the Shanghai Composite Index fell by about 7%. A weaker currency was cited as a main reason for the rout. Stock markets across the region fell in response, with the Hong Kong market down about 3%, the Japanese market off more than 2% and the South Korea market down around 1%.
In early trading, the Dow Jones Industrial Average was off about 200 points while the Nasdaq Composite Index lost around 75 points and the S&P 500 Index fell nearly 25 points.
Treasuries were higher as the yield on the two-year Treasury fell to 0.96% from 0.99% on Wednesday, while the 10-year Treasury yield dropped to 2.16% from 2.17% and the 30-year Treasury bond yield decreased to 2.93% from 2.94%.
The 10-year muni to Treasury ratio was calculated on Wednesday at 81.4% compared with 82.4% on Tuesday, while the 30-year muni to Treasury ratio stood at 91.9% versus 92.1%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 39,195 trades on Wednesday on volume of $10.10 billion.
Tax-Exempt Money Market Funds Post Inflows
Tax-exempt money market funds experienced inflows of $2.54 billion, bringing total net assets to $256.71 billion in the week ended Jan. 4, according to The Money Fund Report, a service of iMoneyNet.com. This followed an inflow of $560.1 million to $254.16 billion in the previous week.
The average, seven-day simple yield for the 359 weekly reporting tax-exempt funds remained at 0.01% for the 140th straight week.
The total net assets of the 939 weekly reporting taxable money funds decreased $16.06 billion to $2.492 trillion in the week ended Jan. 5, after an outflow of $4.14 billion to $2.508 trillion the prior week.
The average, seven-day simple yield for the taxable money funds held steady to 0.06% for the second consecutive week.
Overall, the combined total net assets of the 1,298 weekly reporting money funds fell $13.51 billion to $2.749 trillion in the period ended Jan. 5, which followed an outflow of $3.58 billion to $2.763 trillion in the prior week.
Primary Market
On Thursday, Bank of America Merrill Lynch is expected to price the South Carolina Public Service Authority's $382 million of Series 2016A tax-exempt revenue obligation refunding bonds.
BAML is also set to price the second part of the Board of Regents of the University of Texas system's offering, which consists of $250 million of Series 2016A taxable revenue financing system bonds. The bonds are rated triple-A by Moody's, S&P and Fitch.
And BAML is slated to price the city of Tallahassee, Fla.'s $150 million of Series 2016A project healthcare facilities revenue bonds for Tallahassee Memorial Healthcare Inc. The issue is rated Baa1 by Moody's.
Stifel is set to price Orange County, Calif.'s $334.31 million of taxable Series 2016A pension obligation bonds on Thursday. The issue is rated AA by S&P and Fitch.
And JPMorgan Securities is expected to price on Thursday the KU Central Development Corp.'s $333.18 million of Series 2016 lease revenue bonds, which are being issued through the Wisconsin Public Finance Authority. The issue is rated Aa2 by Moody's.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $993.6 million to $10.49 billion on Thursday. The total is comprised of $4.82 billion competitive sales and $5.67 billion of negotiated deals.
