NEW YORK – Tax-exempt yields are rising across the curve, following Treasuries, but activity is light as traders shy away from a market that can’t make up its mind.
“Yields are rising a little bit and it’s been a whipsaw in the market,” said a trader in New Jersey. “One day it’s up, one day it’s down.”
The trader added activity and trading are relatively light despite heavy issuance this week, causing market participants to “be skittish in the secondary.”
“A lot of traders are a bit tired of the seesaw in the market,” the trader said.
In Thursday morning trading, munis were steady in the short-end and yields rose in the middle of the curve on out. Yields on credits maturing between 2017 and 2022 rose up to two basis points, while yields on credits maturing between 2023 and 2035 jumped up to three basis points. Credits maturing beyond 2036 spiked up to four basis points.
On Wednesday, the two-year muni yield closed at 0.42% and the 10-year finished at 2.28%. The 30-year yielded 3.66%.
Thursday morning, Treasury yields were rising on the long end. The 10-year yield was up six basis points to 2.06% and the 30-year was up seven basis points to 3.10%. The two-year was flat at 0.24%.
The five-year Treasury is the hot spot now, according to MMD. Analyst Daniel Berger noted the five-year muni-to-Treasury ratio closed at its highest level in more than two and a half years. “Clearly, an investor seeking value could archive outperformance by investing in the five-year range.”
The five-year muni-to-Treasury ratio closed at 133.7%. The 10-year ratio closed at 114% and the 30-year ratio was 120.4%.
On the primary calendar, Jefferies & Co. is expected to price $1 billion Tennergy Corp. variable rate gas revenue bonds.
The competitive calendar is very light today, with the largest deal in the competitive market coming from Tulsa, Okla., which will auction $50 million general obligation bonds. The bonds are rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s.
In economic news, initial jobless claims fell 9,000 to 397,000 on a seasonally adjusted basis for the week ending Oct. 29, the Labor Department reported Thursday. Continuing claims fell to 3.683 million for the week ending Oct. 22.
The initial claims figure was lower than the median estimates from economists polled by Thomson Reuters. They had expected 400,000 initial claims and 3.680 million continuing claims.
The European Central Bank, in a surprise move, cut interest rates 25 basis points, lowering its main refinancing rate to 1.25%.
