NEW YORK — Secondary trading has been active Friday morning. Yields in the belly of the curve have fallen, particularly in the six- to nine-year range.
Investors, including some retail, have shown an interest the past couple of days in Puerto Rico Sales Tax Financing Corp. sales tax revenue bonds and New York’s Metropolitan Transportation Authority transportation revenue bonds, a trader in New York said. Prices have risen more than five basis points on the morning for the 2017 credits in those deals, he added.
“It’s a supply issue again,” the trader said. “I know we had a bunch of deals, but those deals really did get put away to end accounts. And retail seemed to care; they’re buying it and holding it, as well. That means that the deals were priced right, and were priced to be put away.”
Muni yields started the day mostly stronger, according to the Municipal Market Data scale, after firming on the short end and weakening out long on Thursday.
They’re steady out to three years and past 27 years. But in-between, they’re flat to four basis points lower.
On Thursday, the benchmark 10-year yield finished flat at 2.22%. The two-year yield closed down three basis points to 0.39% after holding steady at 0.42% for 20 consecutive trading sessions. The 30-year yield finished up two basis points to 3.86%.
Treasuries opened Friday’s session slightly weaker. The benchmark 10-year yield rose two basis points to 2.12%.
The two-year inched up one basis point to 0.27%. And the 30-year yield also ticked up one basis point to 3.11%.
Municipal bond mutual funds saw outflows after seven straight weeks of inflows.
The week ended Nov. 30 saw about $297 million in outflows from muni bond funds that report their flows weekly, according to Lipper FMI. In the week ending Nov. 23, there were net inflows of $137 million.
High-yield muni funds, meanwhile, saw a second straight week of outflows over the same period. Funds that report weekly saw outflows of $133 million, Lipper said. The previous week, high-yield funds reported outflows of $111 million.
This was not particularly surprising, according to MMD analyst Daniel Berger. The outflows can be attributed to growing investor comfort with equities following a strong Black Friday, an unexpected jump in employment, and signs of increased central bank involvement in European banks, he wrote in a research post.
In addition, Berger wrote, the slope of the muni yield curve seemed to have shrugged off the Federal Reserve’s Operation Twist to remain steep, particularly the 10-year/30-year spread.
“With fewer retail fund buyers, there is less demand in the longer end of the muni market,” he wrote, “and should they leave in droves the muni curve is likely to steepen for the balance of the year.”
In economic news, the Labor Department reported Friday that non-farm payroll employment rose 120,000 in November, pulling the unemployment rate down to 8.6%. That represents a significant drop from the rate’s range of 9.0% to 9.2% it saw from April through October.
Economists polled by Thomson Reuters estimated the November non-farm payroll employment gain at 117,000. They projected the unemployment rate at 9.0%.
The non-farm payroll employment bump for November followed a revised 100,000 gain for October. The unemployment rate fell 0.4-percentage points from that of the previous month.
Total private payrolls climbed 140,000 in November while government payrolls fell 20,000.
