NEW YORK – Renewed appetite for equities has the fixed-income world playing defense Wednesday morning. Muni traders are anticipating some further back up in yields, but trading is light so selling pressure is minimal.
“I haven’t seen anything going on this morning,” said a trader in New Jersey. “We’re just going to ease into the end of the summer. Quite a few people are on vacation right now.”
He said there’s not much going on in the new-issue market this week, as less than $4 billion is set to be priced.
“The scale cheapened four basis points yesterday,” he added. “I wouldn’t be surprised if we saw the same thing today.”
An early read from Municipal Market Data wasn’t yet available, but the Treasury market is providing guidance for yields to inch upward. The 10-year and 30-year yields are each four basis points higher at 2.20% and 3.53%, respectively, while the two-year yield is steady at 0.23%.
On Tuesday, the 10-year muni yield rose four basis points to 2.19% after sitting at its all-time low for the prior three sessions. The 30-year muni yield skipped up two basis points to 3.82%. The two-year yield held at 0.30%, its lowest yield in more than 40 years.
Fresh economic data provided the impetus for the flock to stocks, as new orders for durable goods jumped 4% in July thanks to an already-known about influx of civilian aircraft orders.
“With orders rising and industrial production growing solidly, it is hard to believe a recession is around the corner,” said Joel L. Naroff at Naroff Economic Advisors.
But the headline looks rosier than some of the details. Core orders, defined as non-defense capital goods excluding aircraft, fell 1.5% in the month following a 0.6% gain in June.
Still, revisions to the June report were positive: new orders were still down, with a 1.3% cutback, but the original estimate was a 2.1% drop.
“While the durable goods data showed a decent level of factory activity heading into the first month of the quarter, we are wondering how much momentum was lost as confidence faltered in response to various negative economic shocks,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
