NEW YORK – The municipal market was largely flat Friday amid fairly light secondary trading activity, as long muni yields dipped back below long Treasuries after two sessions at over 100% of Treasury yields.
“The market is tired, sleepy and over-exercised,” a trader in New York said. “Typical Friday doldrums. Next week there are a few good names bringing new issues, so we will see if we can continue to keep it going. There is more money than there are bonds, so it is keeping things at fairly robust prices. So if the Treasury hangs in here, on a percentage basis we are right there. The outlook looks flat to promising.”
A Los Angeles trader said Friday’s market was “very quiet and unchanged.”
“There’s very little activity today,” the trader said. “The markets have had a long run. The Treasury markets seem to be coming back a little bit. Munis still seem to be stable. There is not a lot of supply on the forward calendar. We expect the market to be may be slowly grind a little bit higher next week.
The Treasury market showed some losses Friday. The benchmark 10-year note was quoted recently at 2.99% after opening at 2.95%. The 30-year bond was recently quoted at 4.02% after opening at 3.95%. The two-year note was recently quoted at 0.59% after opening at 0.56%.
The Municipal Market Data triple-A scale yielded 2.57% in 10 years and 3.67% in 20 years Friday, matching levels of 2.57% and 3.67% Thursday. The scale yielded 3.97% in 30 years Friday, matching 3.97% Thursday.
Friday’s triple-A muni scale in 10 years was at 86.0% of comparable Treasuries and 30-year munis were at 99.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 105.6% of the comparable London Interbank Offered Rate.
The credit is rated AA by Standard & Poor’s.
The economic calendar was light Friday.
Guy LeBas chief fixed income strategist at Janney Capital Markets wrote in a commentary that the last week “was a quiet one on the economic front, but a busy one in terms of interpretation.”
“Fed Chairman Ben Bernanke issued his twice-annual monetary policy testimony to Congress, replete with discussions of economic uncertainty in the coming months and years,” he wrote. “As always, the central question is ‘recovery or double dip?’ Our answer to that question is ‘no.’ Maybe you can’t have it both ways, but you can have it neither, and as the US transitions into the new normal, that’s what we will have.”
LeBas also wrote that “the big news out for this coming week is second quarter gross domestic product, which we anticipate will preview rather effectively trends that will be in place for years.”
“Over the course of the second quarter, our optimism has slowly waned as data have pointed towards growth tracking at a progressively slower level,” he wrote. “Ini¬tial forecasts had a 3.0% annualized expansion baked into the cake, but since that point we’ve cut to 2.4% as of the beginning of the month and even further to 2.2% today. Economic output growth of that relatively low magnitude, if sustained as we expect, has disappointing implications for long term returns in the capital markets, both debt and equity, returns which are being compounded by greater savings rates from US consumers.”
Activity in the new-issue market was light Friday.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $2.090 billion to $11.037 billion. The total is comprised of $3.759 billion of competitive bonds and $7.278 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,192 trades on 15,139 issues for volume of $13.92 billion. Most active was Miami-Dade County 5s of 2020 bonds that traded 196 times at a high of 97.324 and a low of 96.574.
