NEW YORK — The municipal market tentatively advanced into Friday afternoon, as though waiting for someone to step up and prove the levels it’s reached.
There were plenty of bid-wanteds available, including some retail orders, a trader in California said. But while some are solid, he added, some are a fair way away from where the market rests.
Conviction has been hard to come by, as there’s been so little trading.
“We’ve had a nice run; now we need to prove that this is where the market should be,” the trader said. “If Treasury yields stay where they are, then there’s no question that you have the most compelling ratios that we’ve had in a very long time. You would think that in itself would drive a lot of activity.”
The market might see an adjustment next week, which might also be a reason why there’s been little activity on the day.
The Municipal Market Data triple-A scale had not been updated by press time. Before noon, muni yields were flat. Yesterday, of course, they were anything but.
The benchmark 10-year muni yield dropped seven basis points, finishing Thursday at 2.38%. It equaled its lowest yield in two years, dating to Oct. 7. It has dropped 29 points in a week.
The 30-year muni yield ended at 3.95%, its lowest since early November. Its yield has dropped 40 basis points since last Friday.
The two-year muni yield ticked down another basis point to 0.35%, its lowest yield since Aug. 31, 2010.
Treasury yields have softened a little, after Thursday’s huge rally. The 10-year Treasury yield climbed three basis points to 2.45%, backing off its lowest level since Oct. 12, achieved during the rally.
The two-year Treasury yield rose from its lowest level ever, inching up two basis points to 0.39%.
After falling 21 basis points on Thursday and 67 basis points on the week, the 30-year yield took a break from its plunge. It jumped six basis points on the morning to 3.74%.
Supply has been tagged as one reason behind the falling muni yields. And the situation will likely not get worse. The industry predicts that municipal bonds expected to be sold next week will total $2.25 billion versus a revised $3.24 billion this week.
“We’re deep enough in the year now where we’re having conversations about whether there’s ever going to be supply again,” the trader said.
