A firmer Treasury market Friday morning wasn't enough to provide support for municipal bonds as losses continued.
Following over $2 billion in outflows from municipal bond funds that report weekly, mutual funds continued to raise cash in the secondary.
"For the most part it's status quo. There is a lot of selling pressure," a New Jersey trader said. "We are not seeing the retail or institutional flow. Funds are under pressure and people are just waiting it out."
This trader added that bonds continue to get cheaper, and no market participant is eager to jump in and provide support. "Some guys are picking spots out but bonds off yesterday are still off today. There no rush to march stuff up. Even with a stronger Treasury market there are fundamentals that are consistently working against us."
Still, one trader that is focused in the secondary market said a few buyers emerged to pick up cheap bonds. "Munis are getting a bid with Treasuries," this New York trader said.
Thursday, yields on the triple-A Municipal Market Data scale ended as much as two basis points higher. The 10-year yield increased one basis point to 2.94% and the 30-year yield rose two basis points to 4.46%. The two-year finished flat at 0.43% for the 27th straight session.
Yields on the Municipal Market Advisors scale ended as much as two basis points higher. The 10-year yield rose two basis points to 3.09% and the 30-year yield increased one basis point to 4.55%. The two-year was flat at 0.55% for the sixth session.
Treasuries posted gains Friday morning, erasing all losses from Wednesday and Thursday. The benchmark 10-year yield slipped eight basis points to 2.82% and the 30-year yield slid seven basis points to 3.81%. The two-year yield fell two basis points to 0.38%.
In economic news, sales of new single-family homes fell 13.4% to a seasonally adjusted annual rate of 394,000 in July from a revised 455,000 in June. The rate was lower than the 490,000 expected by economists.
"New home sales were much weaker than expected in July but we think the decline reflects volatility rather than anything fundamental," wrote economists at RDQ Economics. "Given the increases in housing starts and building permits in July, and the strengthening in homebuilder confidence in August, we do not believe the recovery in housing is faltering."