The tax-exempt market ended mostly steady on Friday, after three weeks of posting solid gains.

Overall for the week, traders said deals were very well received and the secondary was firmer.

“I would say munis are holding flat,” a New Jersey trader said Friday. “Muni yields are not backing up with Treasuries and with ratios nearing the lows it doesn’t make a lot of sense.”

Overall for the week, new deals did extremely well and there are no balances left on accounts. But the secondary has been frustrating for traders. “Secondary activity is stalled and it seems like a frustrated Friday market. There are no adjustments being made for offerings.”

Other traders said the market was steady despite weaker Treasuries. “Munis are not following Treasuries lower which is weird,” a New York trader said, adding munis were trading flat. “Traders are sticking put with their levels and hoping to make even more money.”

To be sure, the Municipal Market Data scale showed weaker municipals. On Friday, the 10-year MMD yield and the 30-year yield rose two basis points each to 1.69% and 2.86%, respectively. The two-year closed flat for the ninth session at 0.30%.

The 10-year yield now trades nine basis points above its record low of 1.60% set July 26. The 30-year yield is up seven basis points above is record low of 2.79% hit July 25.

Treasuries were weaker Friday after news the unemployment rate fell below 8% for the first time since January 2009. The benchmark 10-year yield jumped five basis points to 1.73% while the 30-year yield spiked up seven basis points to 2.96%. The two-year yield increased one basis point to 0.26%.

With record low yields, high-yield municipal bond funds have continued to soar. J.R. Rieger, vice president of fixed income at Standard & Poor’s Dow Jones Indices noted the S&P Municipal High Yield Index has returned over 14.4% year-to-date as yields have come down 116 basis points throughout the year.

Conversely, the S&P National AMT-Free Municipal Bond Index returned 6.38% year-to-date.

The spread between investment-grade and high-yield munis has increased about seven basis points from its tightest point to 322 basis points, he noted.

High-yield sectors have outperformed the market as well. The S&P Municipal Bond Tobacco Index has returned 17.18% year-to-date, followed by the S&P Municipal Bond Land Backed Index which has returned 10.41%. The S&P Municipal Bond Health Care Index has returned 9.72%.

State specific indices that are outperforming the general market include Ohio which has returned 8.22% year to date, Illinois which has returned 8.15%, and Colorado which has returned 8.14%. California has returned 7.89% and New Jersey has returned 7.71% year-to-date.

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