The high-yield municipal market is on track to finish in positive territory for the 18th consecutive month even as the broader tax-exempt market extends losses into the sixth trading session Friday.
The S&P Municipal Bond Higher Yield Index returned 0.7% month-to-date and 3.87% year-to-date, driven higher mostly by tobacco bonds. The S&P Municipal Bond Tobacco Index has returned 1.64% in May and 4.46% year-to-date.
The positive returns for high yield bonds come as the investment grade sector is on track to finish in negative territory for the second consecutive month. The S&P National AMT-Free Municipal Bond Index has returned a negative 0.59% in May.
This week alone, yields in the high-grade market rose double digits.
Friday, trading activity slowed as the Securities Industry and Financial Markets Association recommend bond markets close early at 2 p.m. Eastern ahead of the three-day holiday weekend. Bond markets have a full close Monday.
“It’s very quiet because of the half day,” a New York trader said, adding yields traded steady.
In light trading Friday, trades compiled by data provider Markit showed mostly weakening. Yields on New York’s Metropolitan Transportation Authority 5s of 2028 rose three basis points to 2.84% and San Jose, Calif., Financing Authority 5s of 2039 increased two basis points to 3.75%.
Yields on Oregon State Department of Administrative Services 5s of 2023 increased two basis points to 2.20% and Florida State Board of Education 5s of 2018 rose one basis point to 1.01%. Yields on Utah Transit Authority 5.25s of 2019 increased one basis point to 1.35%.
Yields on the Municipal Market Data scale were steady Friday. The 10-year and 30-year yields were unchanged at 1.90% and 3.08%, respectively. The two-year also finished flat at 0.29%.
Yields on the Municipal Market Advisors 5% scale showed yields steady to one basis point higher. The 10-year and 30-year yields were flat at 1.97% and 3.19%, respectively. The two-year was also unchanged at 0.35%.
The Treasury yield curve flattened Friday. The benchmark 10-year yield slid one basis point to 2.01% and the 30-year yield dropped three basis points to 3.17%. The two-year yield increased one basis point to 0.26%.
Looking to next week’s issuance, $4.03 billion is expected to be issued, down from this week’s revised $7.19 billion. The negotiated market can expected $3.22 billion, down from last week’s revised $5.77 billion. On the competitive calendar, $807.3 million should be auctioned, down from last week’s revised $1.42 billion.