NEW YORK – The municipal market was unchanged to slightly firmer Friday amid fairly light secondary trading activity.
Traders said tax-exempt yields were mostly flat, but with gains of one or two basis points on the long end.
“There’s not a lot happening right now,” a trader in New York said. “We’re pretty quiet, pretty flat. There are some bits and pieces trading, but activity is light for the most part and we’re just unchanged.”
The Municipal Market Data triple-A 10-year scale dipped three basis points Friday to 3.31%, the 20-year scale declined two basis points to 4.56%, and the scale for 30-year bonds fell two basis points to 4.78%.
Friday’s triple-A muni scale in 10 years was at 99.4% of comparable Treasuries and 30-year munis were at 105.5%, according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 112.5% of the comparable London Interbank Offered Rate.
Treasuries showed gains Friday. The benchmark 10-year note was quoted recently at 3.33% after opening at 3.39%. The 30-year bond was quoted recently at 4.53% after opening at 4.56%. The two-year note was quoted recently at 0.56% after opening at 0.58%.
In economic data released Friday, the U.S. economy expanded at a faster annual pace in the fourth quarter, growing 3.2% due to the stronger consumer spending.
Consumer spending, which accounts for about 70% of gross domestic product, rose 4.4% during the three-month period ended Dec. 31 — the largest gain since the first quarter of 2006. Consumption of durable goods was up 21.6%.
Meanwhile, inflation slowed to a new record. Personal consumption expenditures excluding food and energy goods, the Federal Reserve’s preferred inflation measure, rose just 0.4% — the smallest gain since record-keeping began in 1959.
Core PCE rose 0.5% in the third quarter. That compares with a 2.8% gain for the inflation gauge in the fourth quarter of 2007, near the start of the recession.
Economists expected GDP to increase 3.6% for the quarter, according to the median estimate from Thomson Reuters. The third quarter GDP expanded 2.6%.
Consumer sentiment fell in January, dropping to 74.2 from a prior-month reading of 74.5 in the Thomson Reuters/University of Michigan report released Friday.
The decline was driven by concerns about rising prices. The current conditions index, a survey of consumers’ willingness to buy big-ticket items, dropped to 81.8 from 85.3 in December.
The index of consumer expectations, a survey of future consumer expectations, increased to 69.3 from 67.5 in December. Consumers expressed optimism about employment growth. Just 22% of respondents said they think the unemployment rate will increase in 2011, the lowest level in more than a decade.
Consumers also said they were worried about inflation diminishing their financial prospects.
An employment index used to track overall labor costs rose 0.4% for the final three months of 2010 on a seasonally adjusted basis, matching the growth rate recorded in the prior quarter.
The fourth-quarter gain was lower than the 0.5% uptick economists expected, according to Thomson Reuters.
Visible Supply
The Bond Buyer's 30-day visible supply rose $109.9 million to $8.910 billion. The total is comprised of $1.858 billion of competitive bonds and $7.051 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported there were 48,930 trades of 18,340 issues for a volume of $13.19 billion. Most active was Newport Beach, Calif., 5.875s of 2030 that traded 294 times at a high of par and a low of 98.950.
