Municipal bond yields ended almost 10 basis points higher on Friday, following an even bigger selloff in the Treasury market, after a better-than-expected October employment report was released.
October non-farm payrolls were up 204,000 with private payrolls up 212,000, according to the Bureau of Labor Statistics. The jobless rate ticked up one point to 7.3% due to the partial government shutdown. Economists had expected 125,000 new jobs.
Muni and Treasuries yields jumped on concern the Federal Reserve will taper its $85 billion a month bond purchasing program sooner than expected. "If the Fed is true to its data-dependent approach to monetary policy then we should get the tapering announcement at the December FOMC meeting," economists at RDQ Economics said. "Adjusted for government workers on temporary layoff, the unemployment rate fell to 7.0% from 7.2% — and while this was driven by lower participation, this continues a trend that has been in place for the last few years — while the near-term momentum in payroll growth edged above 200,000 per month on the three-month average.
"In addition, third-quarter GDP topped expectations at 2.8% and the ISMs point to stronger growth in October," the economists said. "The economy appears to have sustained growth momentum in recent months, which argues for the Fed to throttle back on QE and we expect this announcement at the next Fed meeting."
The benchmark 10-year Treasury yield jumped 15 basis points to 2.75% and the 30-year yield rose 12 basis points to 3.84%. The two-year yield increased two basis points to 0.32%.
"Treasuries are getting hit and munis are being cut about three to five basis points," a Chicago trader said Friday morning. As the day progressed, yields rose further.
Trades compiled by data provider Markit showed weakening. Yields on Houston Utility System 5s of 2036 jumped nine basis points to 4.27%.
Yields on South San Antonio Independent School District 0s of 2034 and Bay Area Toll Authority 5s of 2026 rose seven basis points each to 4.60% and 3.36%, respectively.
Yields on Puerto Rico Sales Tax Financing Corp. 0s of 2054 increased five basis points to 6.80% and Maryland Health and Higher Educational Facilities Authority 4.665s of 2036 rose four basis points to 5.41%.
Yields on Connecticut Health and Educational Facilities Authority 5s of 2040 rose two basis points to 3.52% and California's Golden State Tobacco Securitization Corp. 5.75s of 2047 increased one basis point to 7.77%.
Still, one CUSIP of Puerto Rico Public Buildings Authority 5.6s of 2030 fell one basis point Friday afternoon in block size trading from the morning session.
On Friday, the triple-A Municipal Market Data scale ended as much as nine basis points weaker. The 10-year yield rose nine basis points to 2.58% and the 30-year yield rose seven basis points to 4.15%. The two-year was steady for the ninth session at 0.34%.
Yields on the Municipal Market Advisors benchmark scale rose as much as eight basis points. The 10-year yield increased seven basis points to 2.72% and the 30-year yields rose six basis points to 4.36%. The two-year yield increased one basis point to 0.49%.
The municipal bond market is closed Monday for Veteran's Day. The market will reopen Tuesday.