The tax-exempt market extended losses for a fourth consecutive trading session Friday as municipal bond yields followed Treasury yield higher.
With little issuance on a summer Friday, traders looked to bid lists in the secondary market and Treasuries for direction.
One New York trader said fewer bid lists surfaced Friday than earlier in the week, but bonds that were trading were on the short end of the curve. "We are turning over the short, small pieces but I don't see as many bids-wanted as I did Thursday."
Other traders said munis outperformed Treasuries, though munis could continue to sell off Monday. "The 10-year is off nine basis points so the softness is coming from the Treasury market," a Virginia trader said. "Munis are probably holding in a little better than Treasuries because it's a quiet summer Friday, but we could see some catch-up on Monday after a big selloff Friday in Treasuries."
This trader added the new-issue supply calendar looks manageable, which could help insulate munis from Treasury weakness.
The market can expect $4.10 billion in new issues next week, up from this week's revised $3.82 billion. In negotiated deals, $3.40 billion is expected, up from this week's revised $3.18 billion. On the competitive calendar, $702.8 million is expected to be auctioned, up from this week's revised $635.4 million.
Friday, yields on the Municipal Market Data scale ended as much as three basis points higher. The 10-year yield rose three basis points to 2.88% and the 30-year yield increased two basis points to 4.39%. The two-year finished flat at 0.43% for the 23rd consecutive session.
Yields on the Municipal Market Advisors scale ended as much as three basis points higher. The 10-year yield rose two basis points to 3.02% and the 30-year yield climbed three basis points to 4.49%. The two-year was steady at 0.55% for the second session.
Treasuries weakened Friday. The benchmark 10-year yield rose seven basis points to 2.84% and the 30-year yield climbed five basis points to 3.86%. The two-year yield rose one basis point to 0.36%.
According to Interactive Data, trading volume slipped Monday and Tuesday from the previous week, then increased on Wednesday.
On Monday, there were 41,133 trades with a par value of $5.075 billion. Of those, 45% were from retail and 55% of par value from institutional investors. That is down from the previous week's 43,031 trades of $5.476 billion.
Tuesday, 46,696 trades took place with a par value of $7.460 billion. That is down from the previous Tuesday's 48,765 trades, but up in par value from the last week's $7.213 billion. Retail participation of par value traded fell to 37% from 40% while institutional participation increased to 63% from 60% the previous Tuesday.
By Wednesday, trades were up to 50,698 from the previous week's 48,595 with par value traded rising to $8.434 billion from $8.187 billion. Retail participation of par value increased to 38% from 37% and institutional participation fell to 62% from 63% the week before.