NEW YORK – The municipal market was mostly flat amid fairly light secondary trading activity Friday.
“There’s a bit of a weaker tone, but we’re pretty much flat,” a trader in Los Angeles said. “Just stuck in the summer doldrums today, a quiet end to the week.”
The Treasury market showed some gains Friday. The benchmark 10-year note was quoted recently at 2.91% after opening at 2.97%. The 30-year bond was quoted recently at 3.98% after opening at 4.08%. The two-year note was quoted recently at 0.56% after opening at 0.58%.
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 88.3% of comparable Treasuries and 30-year munis were at 99.7%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 107.3% of the comparable London Interbank Offered Rate.
“We’re pretty flat,” a trader in New York said. “I’m not really seeing much movement.”
In economic data released Friday, real gross domestic product increased at a 2.4% annual rate in the second quarter of 2010, the smallest gain in three quarters, as a surge in imports and slowing inventory growth outweighed gains in real estate and state and local spending.
Consumer spending, which accounts for about 70% of real GDP, increased 1.6% for the quarter ending on June 30.
Real GDP in the first quarter of 2010 was revised higher to 3.7% from 2.7% reported last month.
Economists polled by Thomson Reuters expected second quarter real GDP to increase 2.5% annually, according to the median estimate.
The University of Michigan’s final July consumer sentiment index reading was 67.8, compared to the preliminary July 66.5, the final June 76.0, and the final May 73.6 reading.
Economists polled by Thomson Reuters had predicted a 67.0 reading for the index.
The Chicago Purchasing Managers’ Business Barometer rose to 62.3 in July from 59.1 in June.
The data is compiled on a seasonally adjusted basis. An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.
Economists polled by Thomson Reuters predicted a 56.0 reading for the indicator.
Guy LeBas, chief fixed income strategist at Janney Capital Markets, wrote in a commentary that, “second quarter GDP results of 2.4% were weaker than consensus but the bigger story was the downright atrocious mix: consumer spending expanded by a measly 1.6%.”
“The real boosts for activity came from inventories, government spending, and the housing markets, all three of which are unsustainable sources of economic output for the long run,” he wrote. “As a whole, Friday’s GDP results provide concrete evidence of a concept we’ve been touting for about three months now: the US economy is transitioning to a long term situation marked by slower output growth and elevated unemployment that will persist for years to even possibly decades.
Activity in the new-issue market was light Friday.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $204.0 million to $7.142 billion. The total is comprised of $1.797 billion of competitive bonds and $5.345 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 42,654 trades of 14,221 issues for volume of $14.41 billion. Most active was New York City 3s of 2020 that traded 351 times at a high of 99.147 and a low of 98.646.
