NEW YORK – Although most market participants assumed the week between Christmas and New Year’s would be dead, there is a surprising amount of activity in muni land. The primary market is expecting a decent deal Thursday and traders say not everyone has closed up shop for the year.
There are “buyers still around,” a trader in New York said.
The Municipal Market Data scale was not updated by press time, but on Wednesday, the 10-year muni yield fell four basis points to 1.87% to set a new record low as recorded by MMD. The 10-year broke the previous record of 1.91% set the week before Christmas. The two-year yield closed flat at 0.36% for its 15th consecutive trading session. The 30-year yield finished at 3.58%.
Treasuries were mostly flat, and weaker on the long-end. The two-year yield was steady at 0.28% while the benchmark 10-year yield was flat at 1.93%. The 30-year yield rose two basis points to 2.94%.
In a surprise, the primary market is expecting a competitive deal, $229.5 million Municipal Electric Authority of Georgia revenue bonds in four series, which was added to the calendar Wednesday. The first series consists of $100.73 million of taxable power revenue bonds. The second series consists of $81.24 million of taxable general resolution projects subordinated bonds, and the third series is $59.53 of taxable project one subordinated bonds. The last series will be $57.98 million of taxable general power revenue bonds.
In economic news, seasonally adjusted jobless claims rose to 381,000 for the week ending Dec. 24, a 15,000 gain from the previous week’s 366,000, the Labor Department said. The initial claims were higher than the median 375,000 expected by economists.
“The unemployment claims data continue to signal that the pace of improvement in the labor market may be gaining momentum,” wrote economists at RDQ Economics. “For seven consecutive weeks, the four-week average of claims has been below the 400,000 mark. Given the decline in the savings rate in recent months, stronger job creation is vitally important for the U.S. consumer and from this and other indications, it appears this improved jobs picture may be falling into place at the end of 2011.”
In other economic news, pending home sales surged 7.3% to a 100.1 reading in November, the highest level in 19 months, according to the National Association of Realtors. The surge came after an unrevised 10.4% increase to 93.3 in October. The figures beat expectations; economists had predicted a 2.0% increase.
“Indeed, the broader theme is one of a gradually improving U.S. housing market,” wrote Robert Kavcic of BMO Capital Markets Economics. “The months’ supply of homes for sale in the new and existing markets has come back down to more normal levels, mortgage lending standards have stabilized in recent quarters, and a gradually improving labour market should lend further support.”
