Calmness settled over the municipal market Friday afternoon as traders digested the week's news and waited for July 1 reinvestment money to hit the market next week.
"As we close out the most dramatic quarter since the fourth quarter of 2010, it appears the bleeding has been contained, at least for now," said Chip Hughey, fixed income trader at Caprin Asset Management.
Yields were mostly steady Friday afternoon ahead of what is expected to be a quiet week due to the Fourth of July holiday. The Securities Industry and Financial Markets Association recommends bond markets close early Wednesday and have a full close Thursday.
"Even though yields backed up to the most attractive entry point since 2011, tax-exempt participants were wary of stepping back in until Treasuries found their footing," Hughey said.
"The eventual stabilization in the Treasury market laid the groundwork for the muni market to begin digesting the sizable backlog of new deals that issuers had postponed last week in response to the significant volatility in debt markets. The rebound came at a fortuitous time for the new general obligation issuance out of Illinois and Georgia which both enjoyed enthusiastic receptions."
In the secondary this week, retail and institutional sized trades starting moving again mid-week, Hughey said.
Thursday, yields on the Municipal Market Data scale ended as much as eight basis points lower. The 10-year yield slid five basis points to 2.56% and the 30-year yield dropped eight basis points to 3.83%. The two-year was steady at 0.50% for the second session.
Yields on the Municipal Market Advisors 5% scale fell as much as eight basis points Thursday. The 10-year yield fell six basis points to 2.74% and the 30-year yield dropped eight basis points to 3.96%. The two-year yield fell two basis points to 0.53%.
Treasuries were flat to weaker Friday afternoon. The benchmark 10-year yield rose two basis points to 2.50%. The two-year and 30-year yields were steady at 0.36% and 3.54%, respectively.