NEW YORK — The municipal market took a multitude of strengths into the opening Thursday morning. They ranged from attractive ratios to Treasury yields, favorable assessments from the ratings agencies, and a certainty that the Federal Reserve will preserve a low-rate environment for another two years.
In response, the market opened quiet but firm, according to a trader in New York.
“We’re seeing a couple of trades in the five-year range,” he said. “We’re also seeing a couple of trades in the 15- and 20-year range. But there’s nothing really crazy, so far.”
Tax-exempt yields started the day mixed, according to Municipal Market Data. They’re strongest between seven and 21 years along the curve, falling one to three basis points.
But munis from 2012 to 2016 are steady, as are those beyond 2034. Those maturing in 2017 and 2033 are flat to one basis point firmer.
Wednesday’s session ended with the 10-year muni yield down 12 basis points to 2.26%, its lowest yield since Sept. 3. The two-year muni yield dropped five basis points to 0.30%, its lowest yield in more than two years.
The 30-year muni yielded 3.84%, eight basis points lower on the day, and its lowest level since late October.
Treasuries started the morning mostly weaker. The benchmark 10-year Treasury yield, after a 19-basis-point plunge Wednesday, jumped 13 basis points to 2.21%. The 30-year yield rose 11 basis points to 3.59%.
The two-year yield, though, held at one basis point above its all-time low at 0.19%.
Primary market supply has been low all week. Muni market participants note that this has been a significant reason for plunging muni yields.
This week, the industry predicts that municipal bonds sold will total $2.25 billion against a revised $3.24 billion last week. No large new deals are expected to reach the market Thursday.
After several days of spectacular gyrations, the equities markets started strong out of the gate. The markets were up by at least 2.10%, with the Dow Jones Industrial Average recently 225 points higher than its close yesterday.
“If equities take another drop-off, it’ll definitely take people’s focus off of bonds,” the trader said. “So, we’re rooting for equities today.”
The economy received a small boost on the morning. The Labor Department reported Thursday that initial jobless claims dropped 7,000 to a 395,000 for the week ending Aug. 6. It marks the lowest level since early April.
In addition, continuing claims fell to 3.688 million for the week ending July 30, the lowest level since April 16. The numbers beat economists’ predictions, which stood at 400,000 initial claims and 3.72 million continuing claims, according to the median estimate from Thomson Reuters.
