The municipal market projected a stronger bias Friday in the face of light activity and a snowstorm that sidelined participants in the Northeast.
A smattering of bid-wanteds and some executions by institutions helped the market to hold its levels while Treasury yields rose for debt with short and intermediate maturities.
"The market's bias is toward strength," a trader in New York said. "If you weren't willing to make a half-decent bid, there was probably somebody who was."
While there were few price changes in existing credits, newer paper appeared to generate interest, he added.
The winter snowstorm that broadsided much of the Northeast Thursday evening kept market participants from returning to their desks after the
The picture for muni credit continues to improve, even though headlines of credit risk plague some prominent issuers, John Dillon, chief municipal bond strategist at Morgan Stanley Wealth Management, wrote in a research brief.
Consequently, Dillon maintains support for slight extensions on the credit scale to mid-tier A-rated for general obligation paper and mid-tier triple-B for essential service revenue bonds. "Structure remains key going forward and we strongly prefer 5% coupons or higher," he said.
Tax-exempt yields generally outperformed those of Treasuries as the latter weakened into the start of 2014. Munis then underperformed as Treasuries found their footing on Thursday, Dillon added.
"When combined with 2014's calendar roll, week-over-week muni yields were flat to higher across the board on 5-, 10- and 30-yr triple-A MMD benchmarks," he said.
New issuance is expected to dribble into the market next week before the calendar hits its usual stride around mid-month.
Potential long-term muni volume for next week is expected to total $1.79 billion, up from sales of $10.8 million this week. That breaks down into $869.3 million scheduled for negotiated sale and $918.2 million set for auction on the competitive side of the ledger, Ipreo, The Bond Buyer and Thomson Reuters figures show.
"There's just no supply right now," another trader in New York said. "Whatever weakness you may experience in Treasuries is not going to affect us until we see some supply, or something else takes place."
Demand remains stubbornly feeble. Muni bond mutual funds recorded a 32nd consecutive week of outflows for the week of Jan. 1, according to Lipper FMI numbers.
Weekly reporting funds recorded outflows of $1.47 billion, with long-term muni bond funds shouldering the bulk of the losses, at $1.23 billion. Muni bond funds hemorrhaged $1.49 billion the previous week, as many funds executed tax-loss swaps near the year end.
Trades in the secondary market Friday were stronger, according to data from Markit.
Yields on the Municipal Market Data triple-A scale on Friday froze with the wind chill in the northeast.
The triple-A, tax-exempt 10-year ended Friday's session unchanged at 2.79%. The 30-year finished flat at 4.20%. The two-year yield held at 0.35%.
Yields on the Municipal Market Advisors benchmark triple-A scale on Friday held steady across the curve.
The 10-year triple-A yield remained unchanged at 2.79%, the 30-year at 4.41% and the two-year at 0.37%.
Treasury yields mostly weakened across the curve Friday. The 10-year yield inched up one basis point to 3.00%. The 30-year yield held fast at 3.93%. The two-year climbed two basis points to 0.41%.
