The municipal bond market ended mostly stronger on Friday after two straight days of losses, as dealers unloaded inventory left over from primary deals at higher prices to customers.
Triple-A-rated general obligation bonds out for the bid traded at "healthy" levels, a Virginia trader said. "There is plenty to bid in the secondary and there are a lot of smaller pieces. Levels seem firm in here."
Activity wasn't robust enough to push the market higher, though traders said yield levels were near Thursday's prices.
"It's slow but it's mostly unloading of the primary bonds," a Chicago trader said. On Friday morning trading volume was up 16% relative to the average of the past five Friday trading sessions, with sell trades to customers making up $1.96 billion. Interdealer trading volume was $922 million followed by customer sell trades at $702 million.
By the end of the day, trading volume was nearly 25% higher than the average of the previous five Fridays with almost $8 billion traded. Dealer sell trades to customers made up the majority of trading with $3.9 billion. Interdealer trading was up 27.5% to $2.17 billion and dealer buy trades from customers totaled $1.84 billion.
The most actively traded issuers were Port Authority of New York and New Jersey and Jefferson County.
In the secondary, trades compiled by data provider Markit showed a mix of strengthening and weakening.
Yields on McClean County, N.D., Solid Waste Facilities 5.15s of 2040 slid four basis points to 5.19% and New Jersey State Educational Facilities Authority 5s of 2043 fell three basis points to 4.74%.
Yields on Wyandotte County, Kan., Unified Government Utility System 5s of 2032 and Arizona State Lottery 5s of 2028 fell one basis point each to 4.46% and 3.78%, respectively. Other trades were weaker. Yields on California 5s of 2022 rose four basis points to 2.97%.
Yields on New York's Metropolitan Transportation Authority 5s of 2028 increased three basis points to 4.19% and Northern California's Tobacco Securitization Authority 5.5s of 2045 rose one basis point to 7.95%.
On Friday, the triple-A Municipal Market Data scale ended as much as two basis points stronger after weakening for two straight sessions. The 30-year yield fell two basis points to 4.14%. The 10-year was steady for the second session at 2.66% and the two-year closed unchanged for the seventh session at 0.33%.
Yields on the Municipal Market Advisors benchmark scale ended mostly unchanged. The 10-year and 30-year yields were flat at 2.72% and 4.37%, respectively. The two-year was steady for the fifth session at 0.38%.
The Treasury yield curve flattened as yields on the short-end rose and yields on the long-end fell. The two-year yield rose two basis points to 0.30%. The benchmark 10-year yield slid four basis points to 2.75% and the 30-year yield fell five basis points to 3.84%.
Looking ahead, supply should be light with the Thanksgiving holiday in the middle of the week. The market can expect $538.2 million of bonds, down from the past week's revised $6.19 billion. The negotiated market can expect $133 million, down from a revised $5.08 billion. On the competitive calendar, $405.2 million should be auctioned, down from the past week's revised $1.11 billion.