The municipal market was quiet and flat ahead of the long Memorial Day weekend, with a positive new home sales number providing no impetus to do anything.
New home sale rose 49,000 to 433,000 in April, beating analysts' predictions of 420,000. Historically positive economic data has a negative impact on fixed-income, but yields held steady throughout the curve on Friday, according to Municipal Market Data's triple-A scale.
"I don't think anyone looks at any one housing number or anything and thinks that it is a reflection of the housing market as the whole," a trader in Chicago said.
The new home sales report is the second progressive housing number announced this week. On Thursday, existing home sales were reported up 1.3% in April to 4.65 million annual rate from 4.59 million in March.
The Federal Reserve has said it will look toward housing data and inflation for an indication for when to raise interest rates. While municipal yields did rise slightly Thursday after the existing homes data were announced, investors said that was because the market was simply taking a breath after a long rally rather than weakening because of the number.
"Munis have traveled a long way here, come down a pretty good amount in past 30, past 60 days," a trader in New Jersey said. "Got to wonder if market needs to step back and digest a bit after movement of reasonable size."
Jim Colby, chief municipal strategist at Van Eck Global, said despite these positive numbers the economic recovery has not been substantial enough for the Federal Reserve to raise interest rates in the near future. "The evidence is pretty clear the economy is not growing as quickly as politicians would like to see," he said in an interview. "Despite the fact the economy is showing some growth patterns, it's not going as quickly as anticipated, or as fast as people thought it would a year ago."
A trader in New York said he does not expect interest rates to rise until late 2015.
The market opened fairly quietly on Friday as market participants prepared for a holiday weekend. A trader in Florida said he expects volume to be light on Friday because many investors left for vacation.
"The biggest issue on Friday will be making sure desks are stacked," he said.
Treasuries were mixed Friday morning, with 30-year yields falling three basis points to 3.40% and the 10-year benchmark climbing two basis points to 2.53%. The two-year note was unchanged at 0.36% from Thursday's market close.
