Robust activity, largely driven by new issuance, propelled the municipal market through Thursday.
Munis stumbled out of the gate early in the day following a jobless claims report that beat economist expectations, only to gain momentum by the afternoon. The Labor Department reported that jobless claims fell by 24,000 to 334,000 in the week ending July 13.
Traders said most activity in the tax-exempt market focused onnew issues as the week's remaining large deals arrived at attractive-enough levels. And the market numbers showed it was indeed active: the trade count over the past two days has been high, a trader in Texas said.
"There was pretty good activity; a lot of that has to do with some of the new issuance," he said. "Yields were a touch weaker in the long end and maybe a touch firmer in the short end, but not any big moves one way or the other."
The market experienced light volatility after the claims report, a trader in New York said. Retail buyers provided support into the afternoon.
"With retail it's more rates-driven, and they're still finding opportunity in rates," the trader said.
Secondary market activity for municipal bonds weakened in the day's session, along with Treasuries, as the focus shifted to the primary, analysts at Interactive Data wrote in a research brief.
A supply-demand dynamic has the muni market in its grip, the trader in Texas said.
"As long as they can keep getting these deals done institutionally, with the 5% coupons taking the lion's share of the bonds out of the market at these levels, we'll be OK," he said. "If the smaller deals continue to stack up, and as long as the dealers have enough capital to put the stuff up on the shelf, the market will be OK. But if you get a hiccup in Treasuries, and dealers are long in a bunch of stuff, we're going to go right back in the slammer."
Following a heavy calendar earlier in the week, new offers emerged in the early afternoon, including the institutional pricing of Miami-Dade County water and sewer system revenue refunding bonds. The Morgan Stanley-managed deal priced for retail Wednesday.
The institutional pricing of $492.6 million bonds saw yields gaining slightly from the retail pricing. The bonds are rated Aa3 by Moody's Investors Service and A-plus by Standard & Poor's and Fitch Ratings.
In the first series, $340 million of water and sewer system revenue bonds, ranged from 4.47% with a 5.00% coupon in 2030 — up five basis points from yesterday's pricing — to 4.84% with a 5.00% coupon in 2042. The bonds are callable at par in 2022.
Yields in the second series, $152.6 million of revenue refunding bonds, ranged from 4.15% with a 5.00% coupon in 2027 to 4.29% with a 5.25% coupon and 4.49% with 4.375% coupon in a split maturity in 2029. The bonds are callable at par in 2023.
In other deals, Citi priced $449 million of San Francisco International Airport revenue bonds in two series. The bonds are rated A1 by Moody's, and A-plus by S&P and Fitch.
Yields in the first series, $361 million, ranged from 2.82% with a 5.00% coupon in 2020 to 5.05% with a 5.00% coupon in 2038. They fell slightly from pre-market pricing, down as much as 51 basis points in the case of the 5.5s maturing in 2027. Bonds maturing in 2027 are callable at par in 2018.
The second series, $87.9 million, was offered at a yield of 4.85% with a 5.00% coupon in 2043. Both series of bonds are callable at par in 2023.
Loop Capital Markets priced for retail $332.2 million of Bexar County, Texas, combination tax and revenue certificates of participation. The COPs are rated Aaa by Moody's, AA-plus by Standard & Poor's and triple-A by Fitch.
Yields ranged from 0.83% with a 2.00% coupon in 2016 to 4.40% with a 5.00% coupon in 2043. The bonds are callable at par in 2023.
In the secondary, trades compiled by data provider Markit showed mostly strengthening.
Yields on Railsplitter Tobacco Settlement Authority, Ill., tobacco settlement revenue 6.25s of 2024 fell three basis points to 2.93%. Yields on San Francisco city and county GOs 5s of 2023 dropped two basis points to 2.76%.
Yields on Massachusetts Water Resources Authority 5.25s of 2042 slipped one basis point to 4.20%. Yields on Scottsdale, Ariz., GOs 3.5s of 2026 ticked up three basis points to 3.62%.
Tax-exempt yields that began Thursday mostly unchanged saw weakening in the curve beyond seven years by the day's close, according to one market gauge. They were steady through four years and at seven years. Yields at five and six years fell two basis points, while those beyond seven years climbed as much as three basis points.
The 10-year triple-A tax-exempt skipped up two basis points Thursday to 2.63%, according to the Municipal Market Data scale read. The 30-year yield increased to 4.03%; the two-year steadied at 0.43% for a second session.
Almost all yields on the Municipal Market Advisors 5% scale rose Thursday. The 10-year yield increased two basis points to 2.81%. The 30-year yield climbed three basis points to 4.13%. The two-year held at 0.53% for the second consecutive day.
Treasury yields climbed beyond the front end of the curve. The benchmark 10-year yield rose four basis points to 2.54%. The two-year yield held steady at 0.31%, while the 30-year jumped six basis points to 3.63%.