Severe weakening earlier in the week followed by a mid-week rally led to a quiet trading session Friday as yields ended mostly steady across the curve.
“It seems like there is trading in some pockets,” a New York trader said. “It was busy in the morning and it has gotten lighter since lunch. It’s a summer Friday.” The activity in the morning appeared to avoid following Treasury yields higher. “There are some trades through the Municipal Market Data scale and the July 1 cash could be the reason,” he said. Money from coupon and principal repayments is expected to hit the market July 1.
“As we close out the most dramatic quarter since the fourth quarter of 2010, it appears the bleeding has been contained, at least for now,” said Chip Hughey, fixed income trader at Caprin Asset Management.
Yields were mostly steady Friday afternoon ahead of what is expected to be a quiet week due to the Fourth of July holiday. The Securities Industry and Financial Markets Association recommends bond markets close early Wednesday and have a full close Thursday.
“Even though yields backed up to the most attractive entry point since 2011, tax-exempt participants were wary of stepping back in until Treasuries found their footing,” Hughey said.
“The eventual stabilization in the Treasury market laid the groundwork for the muni market to begin digesting the sizable backlog of new deals that issuers had postponed last week in response to the significant volatility in debt markets,” he said. “The rebound came at a fortuitous time for the new general obligation issuance out of Illinois and Georgia which both enjoyed enthusiastic receptions.”
In the secondary this week, retail and institutional sized trades starting moving again mid-week, Hughey said.
Friday, trades compiled by data provider Markit showed mostly strengthening.
Yields on New York 5s of 2024 dropped five basis points to 3.16% and Virginia’s Tobacco Settlement Financing Corp. 5s of 2047 fell three basis points to 7.22%.
Yields on Allegheny County, Pa., 5s of 2034 and San Antonio Electric and Gas 5s of 2024 slipped three basis points each to 4.53% and 2.89%, respectively.
Yields on Riverside County, Calif., Transportation Commission 5.75s of 2044 and Virginia Commonwealth Transportation Board 4s of 2037 slid two basis points each to 5.55% and 4.13%, respectively.
Friday, yields on the Municipal Market Data scale ended steady across the curve. The 10-year and 30-year yields were steady at 2.56% and 3.83%, respectively. The two-year was flat at 0.50% for the third session.
Yields on the Municipal Market Advisors scale ended as much as two basis points lower. The two-year yield fell two basis points to 2.72% and the 30-year yield fell one basis point to 3.95%. The two-year was steady at 0.53% for the second session.
Treasuries ended mixed Friday after weakening in the morning turned into lower yields on the long end. The benchmark 10-year yield increased three basis points to 2.51% and the 30-year yield fell two basis points to 3.52%. The two-year was steady at 0.36%.
Looking to next week, the new issue market can expect $991 million of bonds, down from this week’s revised $6.09 billion. In negotiated deals, $948.2 million should be priced, down from this week’s revised $4.84 billion. On the competitive calendar, $42.8 million is expected to be auctioned, down from this week’s revised $1.25 billion.