NEW YORK – The tax-exempt market took a breather from its seven-session rally as muni yields followed Treasury yields higher.

“Munis are weaker by about five basis points,” a New York trader said. “I think munis are tired.” He added yields were too low to fall further.

Munis were slightly weaker Thursday morning, according to the Municipal Market Data scale. Yields inside five years were steady while yields outside six years rose up to two basis points.

On Wednesday, the two-year yield closed flat at 0.31% for the 16th consecutive trading session. The 10-year yield finished at 1.74% while the 30-year yield closed at 3.08%.

The 10-year hadn’t hit 1.74% since Feb. 2 when it yielded 1.69%. It remains six basis points above its record low of 1.68% set Jan. 31. The 30-year beat its previous record low of 3.09% set Tuesday which beat the prior record of 3.13% set Monday. Before this week, the record low was 3.14% last hit on Feb. 2.

Over the course of May, the 10-year yield has plummeted 13 basis points while the 30-year yield has plunged 17 basis points.

Treasuries were much weaker on better-than-expected U.S. economic news. The benchmark 10-year yield jumped seven basis points to 1.91% while the 30-year yield increased five basis points to 3.09%. The two-year was steady at 0.27%.

In the primary market, KeyBanc Capital Markets is expected to price $375 million of Build Illinois taxable sales tax revenue bonds. The bonds are rated AAA by Standard & Poor’s and AA-plus by Fitch Ratings.

Goldman, Sachs & Co. is expected to price $182.7 million of Oklahoma Development Finance Authority St. John Health System revenue and refunding bonds, rated A2 by Moody’s Investors Service and A by Standard & Poor’s.

In economic news, seasonally adjusted initial jobless claims declined 1,000 to 367,000 for the week ending May 5. Continuing claims fell 61,000 to 3.229 million for the week ending April 28.

The 367,000 initial claims were lower than the 370,000 economists had predicted. Continuing claims also came in below the 3.280 million expected by economists.

“After rising significantly during the first three weeks of April, initial jobless claims have largely reversed this increase in the last two weeks,” wrote economists at RDQ Economics. “Although we need to see this lower level of claims persist into mid-May to reverse the increase in the four-week average, we take this report as a hopeful sign that the pickup in claims in April was temporary. We look for payroll growth to strengthen from April’s anemic rate of 115,000 in the coming months to a pace similar to that seen in the first four months of the year.”

In other economic news, the U.S. international trade deficit grew to $51.8 billion in March, up 14.1% from February’s $45.4 billion.

The March deficit was greater than the $50.0 billion expected by economists.

“Although the trade gap widened on a surge in imports in March, the real growth story is the strong increase in the pace of export growth thus far this year,” wrote RDQ economists. “The March surge in real imports was broad-based in industrial supplies, capital goods and consumer goods and does not suggest that U.S. demand growth is slowing. On a year-over-year basis exports continue to expand to all major global regions with Latin America and OPEC leading the pack.”

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