NEW YORK — Relative value investors in the municipal bond market are joining other industry investors on the sidelines Thursday. They’re holding onto their money as they watch muni-Treasury ratios get richer, said a trader in Florida.
“Muni-to-Treasury ratios are richening up today; they’re definitely not at their cheaps,” the trader said. “There’s no reason for relative buyers to jump in and buy just based off of straight ratios. That is hurting a little bit.”
Though the secondary market has been quiet, he added, at least some of the stagnant balances have started to move.
“We’re seeing some hesitation among new positioning,” the trader said. “Although, some of the prices look firm, the depth of bidding is lighter than it has been, say yesterday.”
The Municipal Market Data scale was not updated at press time, but muni yields remained steady at the front of the curve earlier this morning. Yields for maturities in 2015 were flat to a basis point higher. Those between 2016 and 2024 were steady to two basis points higher. Yields for maturities in 2025 to 2027 were flat to one basis point higher. And bonds maturing after 2027 were flat to two basis points higher.
The two-year yield ended Wednesday steady at 0.42% for the 17th straight session. Prior to the streak, it had hovered at 0.44% for 17 consecutive sessions.
The benchmark 10-year muni yield remained at 2.76% for a third straight day. The 30-year yield inched up one basis point to 4.37%.
Treasury yields headed into the afternoon higher. The 10-year yield jumped five basis points to 3.15%.
The two-year yield also climbed five basis points to 0.48%. The 30-year yield edged up two basis points to 4.38%.
Positive employment numbers puts some pressure on Treasuries and higher yields, the trader said. And therefore, in order for the muni secondary market to start to clear, especially with a heavy calendar next week, he said, dealers are going to have to get some clarity with the employment number tomorrow and some adjustment in yields to get buyers in.
