NEW YORK – The tax-exempt market came to a halt Thursday as traders looked forward to the long weekend.
“It’s very quiet today,” said a trader in New Jersey. “There was a fair amount of bids wanted and now it’s very quiet. We are getting ready for the long weekend.”
Muni yields were steady along most of the curve with up to a two basis points increase from the belly of the curve on out, according to the Municipal Market Data scale.
On Wednesday, the two-year munis closed at 0.42% for its seventh consecutive trading session. The 10-year muni yield finished at 2.23%, the lowest it has been since Sept. 30 when it hit 2.22%. The 30-year muni yield closed at 3.73%.
Treasuries continued to slip in early afternoon trading Thursday, posting more losses since the morning. The 10-year yield was back up above 2%, trading up 10 basis points to 2.07%. The 30-year was up eight basis points since Wednesday’s close at 3.11%. The two-year was flat at 0.24%.
The primary market is light Thursday. Piper Jaffray priced one of the biggest deals, $50.5 million South Dakota Health and Educational Facilities Authority revenue bonds. The bonds are rated A1 by Moody’s Investors Service.
Yields ranged from 0.95% with a 2% coupon in 2012 to 4.35% with a 5% coupon in 2025. The bonds are callable at par in 2020.
“Munis are starting to show signs of pressure after early professional trading at steady levels,” wrote MMD analyst Domenic Vonella. “Customer follow through is light, not surprising for the day before a holiday, but this is leading to some concession in the high grade and quality spreads as well as dealers looking to shed some exposure ahead of next week's massive calendar.”
Trades reported by the Municipal Securities Rulemaking Board showed losses.
Bonds from an interdealer trade of Massachusetts School Building Authority 5s of 2030 yielded 3.21%, 14 basis points higher than where they traded Wednesday.
A dealer sold to a customer Chicago Transit Authority 5.25s of 2036 at 4.75%, five basis points higher than where they traded Wednesday.
A dealer bought from a customer Philadelphia water and wastewater revenue 5s of 2036 at 4.59%, five basis points higher than where they traded Wednesday.
Bonds from an interdealer trade of Bulloch County Development Authority 5s of 2026 yielded 4.15%, two basis points higher than where they traded Wednesday.
“Next week's upcoming supply is serving as a distraction with just under $10 billion expected,” Vonella wrote. “Over 40% of next week's supply will be in five names.” He added that over the past week “there was some divergence between the secondary and primary market, which is something that may likely continue into next week.”
