The rally that propelled municipal bond yields this month may be coming to a close, some traders said, as yields rose for a third straight day.
"The municipal rally we've seen in the early days of the New Year may be running out of steam, with a softer market tone Wednesday, and a second day of rising yields, particularly in the 8- to 12-year part of the yield curve," Janney Capital markets said in a report Thursday.
Yields on municipal bonds maturing from 2020 to 2044 were pushed up by as much as one basis point, according to Municipal Market Data's AAA scale read. Bonds maturing from 2019 and in were not reported by press time.
"ICI reported a second week of modest mutual fund inflows last week (+$128 million), and anecdotal reports suggest a continuation of the positive direction when Lipper reports this week's flows later today," Janney said.
Volume this week could reach $4.89 billion, according to Bond Buyer and Ipreo data. Total bond sales last week came to $4.57 billion, according to Thomson Reuters.
The Federal Open Market Committee announced another $10 billion per month tapering of its bond-buying program. Market participants expect the taper to push interest rates higher.
Treasuries were softer Thursday morning, with the 10-year yield up three basis points to 2.71%. The 30-year yield jumped two basis points to 3.65%, while the two-year was unchanged at 0.37%.
