The tax-exempt market ended the week lower, with traders saying the market was overbought from the previous rally.
Late Friday there were some buying spurts as bonds traded cheaper than even a few days prior. And while the tone was weaker, traders said the market could turn around soon.
"We have some buyers out there, but just because there are some cheap offerings," a New York trader said. "They are buying bonds on bid-wanteds because there is not much going on in the street."
Another trader added the tone of the market felt weaker, but expected it to turn around soon. "The relative tone is definitely a little bit weaker but I don't see it lasting too long," a second New York trader said. "It seems like the typical summer retreat here. With net supply still negative by a lot we'll see accounts reemerge shortly."
He added throughout the course of the week, munis backed up with Treasuries, which have been trading off of headlines news. "Just wait until the next flurry of EU news."
And despite some weakening in the market, "yield is still being very well received."
Still, trades in the secondary market compiled by data provider Markit showed strengthening on Friday. Yields on Irving, Texas, Waterworks and Sewer 4s of 2021 dropped four basis points to 1.83% while New York State Bridge Authority 4s of 2024 fell three basis points to 2.53%.
Yields on Columbus, Ohio, 5s of 2021 and California 5s of 2042 dropped two basis points each to 1.70% and 3.82%, respectively.
On Friday, the 10-year Municipal Market Data yield fell one basis point to 1.76% while the 30-year yield dropped two basis points to 2.92%. The two-year finished steady at 0.29% for the 12th consecutive session. Overall for the week, the 10-year and 30-year MMD yields closed up five basis points each.
Treasuries were stronger Friday. The benchmark 10-year yield dropped four basis points to 1.66%. The two-year and 30-year yields fell one basis point each to 0.27% and 2.75%, respectively.
In next week's market, traders are looking forward to the $10 billion California revenue-anticipation note deal. "We'd be a buyer if it prices right," a San Francisco trader said. "However, I'm guessing it will come through at 40 basis points which is kind of our bogie for short paper. I see the deal getting done fairly easily with crossover buyers coming in."
He added a lack of California paper could spur demand. "There is not much in the way of California GO issues coming down the pike. Governor Jerry Brown seems pretty adamant about limiting California's debt to the extent he can. So I'm guessing California is happy to get as much money as possible with levels so low."