The tax-exempt market finished what was mostly a flat week on a softer note Friday as yields rose across the curve.
Weaker Treasuries, a large new issue calendar, and rich muni-to-Treasury ratios all contributed to muni losses.
“We have fewer bonds than other dealers because we got out a week ago,” a Chicago trader said. “But it’s absolutely weaker. Supply is minimized so we aren’t seeing the amount of damage that you would because it’s a Friday. Ratios are awful and syndicates need and will continue to puke out bonds.”
Other traders agreed the market was weaker, following Treasuries. “The long end is much softer,” a second Chicago trader said. “The bid side that was fading yesterday has kept fading. Fund flows this week were strong, but the weak Treasury market at the beginning of the trading day means we opened softer and that’s remained the case.”
He added there is also some selling pressure stemming from the large primary calendar this week. “The large new issue deals from this week opening weaker just took the fight out of buyers.”
In the secondary market Friday, trades compiled by data provider Markit showed weakening. Yields on Port Authority of New York and New Jersey 5s of 2024 jumped four basis points to 2.57%.
Yields Boston 5s of 2022 and Florida State Board of Governors 5s of 2019 rose three basis points each to 1.60% and 1.54%, respectively.
Most reads on the municipal bond market showed weakening Friday.
The Municipal Market Data scale ended lower Friday. The 10-year yield jumped six basis points to 1.75% while the 30-year yield spiked up five basis points to 2.79%. The two-year finished steady at 0.33% for the seventh session.
The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed weakening. The 10-year yield rose five basis points to 1.77% while the 30-year yield jumped six basis points to 2.88%. The two-year was steady at 0.34% for the ninth consecutive trading session.
Treasuries had a significant selloff Friday. The benchmark 10-year yield soared 11 basis points to 1.96% while the 30-year yield jumped 10 basis points to 3.14%. The two-year increased two basis points to 0.28%.