A near-empty slate of new issue bonds and tepid investors weighing the impact of a government shutdown led to a slow and steady market for tax-exempt municipals Thursday, traders said.
"There's not a lot of offering in terms of deals to look at," a trader in New York said. "Where people are still trading, there's some interest in the front end of the curve."
As the U.S. government continues its third day in a shutdown, most traders agreed that the stalemate was at very least uninspiring to investors.
"We're stuck in a trading range as long as things in Washington don't change," a New York-based trader said. "As long as you have this backdrop of government shutdown, people are kind of just watching."
Another trader said the impasse may have "sidelined" investors, while another said municipal investors are waiting to see how the shutdown will factor into Congress' decision to raise the debt ceiling. One investor said he doubted the political maneuvering had anything to do with slow activity Thursday.
Employment data scheduled to be released Friday has been postponed indefinitely due to the government shuttering, the Labor Department announced Thursday.
For the week ending Oct. 2, odd lot trades of under 100 bonds, tracked by BondDesk Group, showed investor buy transactions rose to 77,357, from 76,485 last week. Buy trade volume was lower than the previous four weeks, with par value falling to $1.967 billion from $1.974 billion the week before.
Sell trades dropped to their lowest since the week ending Sept. 4, sliding to 34,228 from 39,523 the previous week. Par value fell to $935 million, the lowest in four weeks, from $1.092 billion.
The ratio of buy to sell trades rose to 2.3 from 1.9 in the previous week, on pace with the ratio seen in the week ending Sept. 18. In par value, the buy to sell ratio increased to 2.1 from 1.8 the previous week.
Ramirez & Co. priced for retail $575 million of Connecticut general obligation bonds, rated Aa3 by Moody's Investors Service and AA by Standard & Poor's, Fitch Ratings and Kroll Bond Ratings.
"Away from Connecticut, there's really not a whole lot out there," a New York trader said.
Institutioanl pricing for $560 million of the Connecticut GOs included the addition of a 5% coupon bond with a maturity in 2026, a yield of 3.17% and an option to call in 2020.
Yields ranged from 0.73% with 3% and 4% coupons maturing in 2016 to 3.56% with a 5% coupon in 2027. The bonds are callable at par in 2023.
Yields on the triple-A Municipal Market Data scale were mostly steady Thursday, with yields dropping as much as one basis point on bonds maturing in 2019, and from 2026 to 2029.
In other economic news, initial jobless claims rose 1,000 to 308,000 in the week ended Sept. 28. The four-week average of 305,000 is the lowest since the week of May 26, 2007, and its fifth straight decline, the Labor Department reported Thursday.
Treasuries strengthened Wednesday afternoon amid the third day of a government shutdown and rising jobless claims ahead of an impending debt ceiling debate later this month.
The benchmark 10-year yield fell three basis points to 2.59%. Two-year yields slumped a basis point to 0.32%, while 30-year yields dropped two basis points to 3.69%.
Top U.S. banking executives from Goldman Sachs and Bank of America Corp. met with President Barack Obama and Treasury Secretary Jacob Lew on Wednesday, discussing long-term ramifications of the government shutdown and the potential impact of a default. The banking leaders warned of serious repercussions should the debt limit not be lifted.
The municipal bond market received good news on tax collection data for September, S&P Dow Jones Indices said in a report Thursday.
"The Census Bureau data continues to show positive tax collection trends, which are important for the underlying health of the municipal bond market," the report said. While property tax collection growth, which is critical for local municipalities, continued to be slow, first and second-quarter collections in 2013 grew 2.8% and 1.9%, respectively, according to the report.