The tax-exempt market ended higher Friday as traders said it was a busier than usual trading day as dealers got their books in order before the end of the year.
Firmer Treasuries, trading on news that a compromise would not be reached in time to prevent a drop off the fiscal cliff, also helped munis trade higher.
"There is definitely a firmer tone today," a New Jersey trader said. "We've sold a fair amount of bonds today and I'm sort of surprised."
He added he cut offerings just slightly in the morning to get out of positions he had held for a while. "And surprisingly, we've sold way more than I thought."
Year-end positioning, along with firmer Treasuries on fiscal cliff fears, is helping move the market. "There are a fair amount of bids from institutional clients. People are still putting money to work. It's not totally unexpected as some people like to be fully vested at year-end."
Other traders said it was still very quiet after an already quiet week. "Traders are probably leaving soon because it's dead," a second New Jersey trader said.
Trades in the secondary market were both stronger and weaker according to data provider Markit.
Yields on California's Bay Area Toll Authority 6.263s of 2049 fell one basis point to 4.11%.
But other trades were weaker. Yields on Washington 4s of 2032 jumped three basis points to 2.96% while Massachusetts School Building Authority 5s of 2022 rose two basis points to 1.86%.
Yields on El Paso, Texas, Water and Sewer 4s of 2020 rose one basis point to 1.49%.
Data from the Municipal Securities Rulemaking Board showed trading is extremely quiet. On Monday, 14,184 trades occurred, down from the 30-day average of 42,136 trades. In par amount, $4.747 billion of trades were made, down from the 30-day average of $12.138 billion.
Activity picked up slightly on Wednesday. There were 32,085 trades, down from the 30-day average of 43,144. In terms of par amount, $6.284 billion was traded, about half of the 30-day average of $12.359 billion.
And Thursday saw the most action. Over 35,000 trades took place, close to the 30-day average of 42,731. And $7.56 billion in par amount was traded, more than half of the 30-day average of $12.259 billion.
Odd-lot trades — or those trades under 100,000 bonds — were also down significantly this week, according to data from BondDesk Group. The ratio of buy trades to sell trades was down to 1.5 from 1.9 the week before. It was also lower than in the previous five weeks.
Looking at the numbers more specifically, there were 40,618 buy trades and 26,252 sell trades. That is down from 76,054 buy trades the week before and 42,423 sell trades the previous week.
In terms of volume traded, the ratio of buy to sell trades was down to 1.4 from 1.7 the week before. There was $1.13 billion in buy trades versus $798 million sell trades. That is down from $2.2 billion buy trades and $1.3 billion sell trades the previous week.
The Municipal Market Data scale ended stronger for a second session Friday. The 10-year yield fell two basis points to 1.72%. The 30-year yield was steady at 2.83% for the fifth session while the two-year closed flat at 0.31% for the eighth consecutive session.
Despite two days of gains during the week, muni yields ended mostly flat. The two-year and 30-year were flat overall for the week. The 10-year yield fell five basis points throughout the week.
Munis followed Treasuries higher on news that a compromise surrounding the fiscal cliff would not be reached by the end of the year. The benchmark 10-year yield fell one basis point to 1.71%. The two-year and 30-year yields dropped two basis points each to 0.25% and 2.88%, respectively.