NEW YORK — The municipal market has followed Treasuries so far this week, and Thursday is shaping up as a repeat performance.
Muni-Treasury ratios remain attractive at the short end of yield curve for investors, but the number of trades is small. Mostly, though, the 10-year muni sector continues to generate the most attention. The sector has seen interest in blocks from crossover buyers and ratio buyers, a trader in Florida said.
“We haven’t seen that expected flattening of the curve like we’re seeing in the Treasury market,” he said. “It might happen somewhere down the road. But at this point, the wings are underperforming the belly.”
The market is mostly firmer along the curve, according to the Municipal Market Data scale. Bonds at the short end of the curve were unavailable at press time. Debt maturing from 2017 to 2021 is two to seven points lower. Maturities beyond 2022 are down one to five basis points.
Munis yields inched downward across most of the curve Wednesday. The 10-year muni yield slipped one basis point to 2.22%, its lowest since Sept. 2.
The 30-year muni yield ticked down a basis point to 3.85%, its lowest level since Oct. 26. And the two-year muni yield remained at 0.30%, its lowest yield in more than two years.
Treasury yields continued on a downward path Thursday morning, firming across the curve. The benchmark 10-year Treasury yield fell 17 basis points to 1.99%, the first time the 10-year ever fell below a 2.00% yield.
The 30-year yield dropped eight basis points to 3.48%. The two-year yield inched down a point to 0.19, on basis point above its all-time low.
New issuance dominated the market Wednesday. The amount reaching the market this week is expected to more than double last week’s total. Volume should rise to around $5.28 billion from the slight $2.25 billion of municipal bond sales seen last week, according to industry estimates.
The larger new deals priced well Wednesday. Many saw yields firm in repricing.
The major equities indexes opened poised to send the markets into turmoil once again, with all three down by at least 4.09% to start the day. The Dow Jones Industrial Average has plummeted 467 points.
In economic news on the day, the Labor Department reported Thursday that initial jobless claims climbed 9,000 to 408,000 on a seasonally adjusted basis in the week ended August 13. Continuing claims for the week ending August 6 rose to 3.702 million.
Both numbers were higher than analysts’ estimates. Economists anticipated 400,000 initial jobless claims and 3.690 million continuing claims, according to the median estimate from Thomson Reuters.
Initial claims for the August 6 week were revised to 399,000. The continuing claims number was revised to 3.695 million for the previous week.
Also, the Labor Department reported Thursday that the consumer price index rose 0.5% in July on a seasonally adjusted basis. This follows an unrevised 0.2% decline in June.
Core consumer prices, not including food and energy, were up 0.2% in July after a revised 0.3% increase in June.
Economists whom Thomson Reuters polled predicted a 0.2% increase for both the overall and core numbers.
