NEW YORK – The municipal market sold off Friday, heading into the three-day Labor Day weekend with three consecutive sessions of rising yields following weeks of historic firmness.
Traders said tax-exempt yields were higher by three to five basis points.
“The market is backing up a bit,” a trader in Los Angeles said. “There’s been a fair amount of profit-taking today, after that payrolls report. There’s a feeling that we’re going to continue to weaken once we get some new supply in here this month, and you could definitely feel that weakness today, though not supply-related.”
Tax-exempts have now opened September with an uptick in yields the first three sessions of the month after doing so just once the entire month of August.
The Municipal Market Data triple-A scale yielded 2.25% in 10 years and 3.33% in 20 years Friday, following 2.20% and 3.29% Thursday. The scale yielded 3.72% in 30 years Friday, following 3.69% Thursday.
Before selling off the past three days, yields dropped to all-time lows in 10-year munis 12 times in the prior 17 sessions. Also, 30-year tax-exempts set record lows four times in the previous eight sessions, while 20-year munis established all-time lows five times over the same time period.
The record lows currently stand at 2.17% and 3.67% in 10- and 30-year tax-exempts, both established August 25. The 20-year low of 3.28% was set August 31.
Friday’s triple-A muni scale in 10 years was at 83.0% of comparable Treasuries and 30-year munis were at 98.2%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 109.1% of the comparable London Interbank Offered Rate.
The Treasury market showed losses Friday. The benchmark 10-year note was recently at 2.71% after opening at 2.63%.
The 30-year bond was recently quoted at 3.79% after opening at 3.72%. The two-year note was at 0.52% after opening at 0.49%.
In economic data released Friday, nonfarm payrolls fell for a third consecutive month in August pushing the number of jobs lost during that period past a quarter million, according to Labor Department data released Friday.
Nonfarm payrolls lost 54,000 jobs in August, even though private nonfarm payrolls grew by 67,000, as the federal government continued to shed Census workers. Payrolls for Census workers fell by 114,000 and total government employment was diminished by 121,000.
Economists expected total nonfarm payrolls to decrease by 131,000 in August, matching the originally reported figure for July. That figure was revised upward to show a 54,000 decline for July. Nonfarm payrolls declined by 175,000 positions in June.
The unemployment rate rose to 9.6% in August from 9.5% in July.
The services sector expanded at the slowest pace in seven months in August as the Institute for Supply Management’s non-manufacturing business activity composite index fell to 51.5 in data released Friday.
Economists polled by Thomson Reuters had expected a 53.5 level.
Activity in the new-issue market was light Friday.
Visible Supply
The Bond Buyer’s 30-day visible supply rose $284.3 million to $5.093 billion. The total is comprised of $1.084 billion of competitive bonds and $4.010 billion of negotiated bonds.
Previous Session's Activity
The Municipal Securities Rulemaking Board reported 40,191 trades of 14,836 issues for volume of $12.25 billion. Most active was Indiana Finance Authority 4.85s of 2040 that traded 309 times at par.
