After a quiet week, tax-exempt traders are looking ahead to next week, when activity in the municipal market is expected to increase significantly.
"It was very quiet," a Los Angeles trader said. "There was not a single deal in California this week. The phone isn't ringing. There are a couple of trades here and there but it's very dead. It's like a Christmas week in the middle of summer."
He added he is expecting activity to pick up next week. "I haven't seen anything negative on next week and with July coupon payments coming in this week I would think we're about the same as before," he said, referring to demand matching supply.
To be sure, the secondary market is dead, but new issues seem to be doing well, the trader added. "Secondary is struggling because retail participation is so low because they don't like these rate levels. But new issues are getting pick up. And with more bad news about the economy every day, retail will hopefully jump back in."
Munis were firmer Friday afternoon, according to the Municipal Market Data scale. Yields inside seven years were steady while yields on the eight- to 10-year dropped as much as two basis points. Outside 11 years, yield fell between one and three basis points.
On Thursday, the 10-year yield and the 30-year yield each fell one basis point to 1.84% and 3.15%, respectively. The two-year ended steady at 0.32% for the 24th straight session.
Munis followed Treasuries higher after a disappointing jobs report that showed the unemployment rate held at 8.2% in June. The benchmark 10-year yield dropped five basis points to 1.55% while the 30-year yield fell four basis points to 2.67%. The two-year yield fell two basis points to 0.28%.