NEW YORK — This week’s new issuance is being well received by the municipal market, in general. There just needs to be more of it, traders say.
And as most of the new volume is sold to end user investors, there’s little left over changing hands in the secondary market. Thursday morning’s activity is particularly slow, a trader in California said.
“The muni market is still strong as ever; there’s still a lot of buyers begrudging, but still buying,” he said. “There’s tons of cash out there, just not enough supply to make it move.”
Tax-exempt yields continue to weaken Thursday morning, backing away from record lows seen over the past several sessions, according to the Municipal Market Data scale. There is no read for the front end of the curve. Maturities six years and out were flat to three basis points higher.
But some saw things differently. “For the most part, prices are hanging in there,” the trader said. “There’s just not enough supply for the prices to get much cheaper. In fact, a lot of the new issues yesterday seem like they were bumping yields more than cutting them.”
The 10-year yield Wednesday climbed two basis points from its record low, as measured by MMD, to 2.09%. The 30-year yield inched up to 3.67%, one basis point from its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 25th consecutive session, apparently content to linger at its lowest level in more than 40 years.
Treasury yields weakened to start the morning, after firming late in the afternoon session Wednesday. The 10-year benchmark yield has jumped 11 basis points to 2.11%.
The 30-year yield has increased eight basis points to 3.36%. The two-year yield has ticked up one basis point to 0.20%.
Volume in the primary is expected to rise from last week’s scant supply. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
Prices for the week’s primary issuance have seen concessions to get deals done and product moved, traders said. With nominal yields at record lows, cuts in yield are necessary to draw investors.
Regardless, deals are getting done, traders added. Investors reportedly snapped up the California Rans in both the retail and institutional order periods.
In economic news, the Federal Reserve reported Thursday that industrial production increased 0.2% in August as utility production dropped. Capacity utilization ticked up to 77.4% from 77.3% in July.
Economists polled by Thomson Reuters predicted that industrial production would rise 0.1% in August and capacity utilization would be 77.5%.
Also, the Labor Department reported Thursday that initial jobless claims rose to 428,000 on a seasonally adjusted basis for the week ending Sept. 10. Continuing claims fell to 3.726 million for the week ending Sept. 3.
Initial claims numbers have been grim. They’ve topped 400,000 since April, except for a one-week drop to 399,000 in August. Economists polled by Thomson Reuters anticipated 410,000 initial claims and 3.710 million continuing claims.
Finally, the Labor Department also reported Thursday that consumer prices rose 0.4% in August on a seasonally adjusted basis. This follows an unchanged 0.5% increase in July.
Core consumer prices, excluding food and energy, increased 0.2% in August, which equaled their July increase. Economists polled by Thomson Reuters predicted a median estimate of a 0.2% increase for both the overall and core numbers.
