NEW YORK – Activity in the tax-exempt market picked up Thursday morning as dealers seemed more willing to participate. Traders said reaction to positive news from Greece and a drop in unemployment claims in the U.S. was limited as munis remain flat.
“It’s a little busier this morning,” a New York trader said, adding there was muted reaction to Greece’s resolution of its debt crisis and munis were not following Treasuries weaker. “They are flat.”
Munis were weaker on the long end, according to the Municipal Market Data scale. Yields inside 11 years were steady while the 12-year yield rose one basis point. Outside 13 years, yields jumped up to three basis points.
On Wednesday, the two-year held steady at 0.29%, its record low as recorded by MMD on Tuesday. The previous record of 0.30% was set Aug. 10. The 10-year yield rose one basis point to 1.85% while the 30-year yield jumped three basis points to 3.25%.
Since munis started weakening last Friday, the 10-year yield has jumped 19 basis points while the 30-year yields have risen 11 basis points.
Treasuries were weaker on positive news from Greece. The 10-year yield rose six basis points to 2.04%, while the 30-year jumped four basis points to 3.18%. The two-year was steady at 0.26%.
In the primary market Thursday, the University of North Carolina at Charlotte is expected to sell $138.3 million of general revenue bonds, via Barclays Capital.
In the competitive market, Frederick County, Md., is expected to issue $88.9 million of general obligation bonds, rated Aa1 by Moody’s Investors Service and AAA by Standard & Poor’s.
Since munis began weakening on Friday, muni-to-Treasury ratios have risen on the long end as munis underperformed and became cheaper. The 10-year ratio increased to 93.9% on Wednesday from 90.8% last Friday. The 30-year ratio rose to 103.5% from 102.2% last Friday.
The five-year ratio reversed, falling to 85.4% on Wednesday from 87.2% last Friday.
The slope of the yield curve continues to flatten. The 10- to 30-year slope fell to 140 basis points from 145 basis points the week before.
In economic news, seasonally adjusted initial jobless claims fell 15,000 to 358,000 for the week ending Feb. 4. The initial claims were lower than the 370,000 estimated by economists.
Continuing claims climbed 64,000 to 3.515 million for the week ending Jan. 28, coming in higher than the estimated 3.5 million.
“In a further sign of improvement in the economy, this report brings more good news from the labor market,” economists at RDQ Economics wrote.