NEW YORK — The municipal market started out strong in the secondary Thursday, following on the heels of a day of incredible gains.
There was active trading in the 10-year range on out along the curve early in the morning. Activity has since slowed, but the market retains some of the early morning’s promise, a trader in Florida said.
“Some of the overall flows seem to have slowed for the moment,” he said. “But that doesn’t mean that further price gains can’t be had. There’s definitely a very solid, firm tone.
Muni yields continue their streak, though at a slower pace than on Wednesday, according to the Municipal Market Data triple-A curve. Maturities at the short end of the curve were flat to three basis points lower.
At the 10-17-year mark, they are two to four basis points firmer. Beyond 2029, they are two to seven basis points lower.
The benchmark 10-year muni yield finished Wednesday at 2.45%, its lowest yield since late October. Its yield has now dropped 18 basis points since Monday.
The 30-year muni yield ended at 4.05%, its lowest since early November. Its yield has dropped 25 basis points since Thursday.
The two-year muni yield fell another two basis points to 0.36%, its lowest yield since Sept. 1, 2010.
By early Thursday morning, Treasury yields also continued to rally, albeit moderately. The 10-year Treasury yield fell one basis point to extend a nine-month low of 2.60%. In mid-April it yielded at much as 3.59%, or 99 basis points more than on this morning.
The 30-year yield, after dropping an incredible 21 basis points since Tuesday, fell another three basis points to start the day at 3.86%.
With investors high on intermediate and longer-term bonds, the two-year Treasury yield held steady at 0.33%.
The market is expected to see $3.25 billion in new supply this week after issuers decided to exercise caution against borrowing during a volatile period. But prices show that those issuers who took chances in the market thus far are getting a really good deal.
A particularly light calendar and healthy appetite propelled the muni market past Treasuries and dropped muni-Treasury ratios across the curve, Janney Capital Markets’ Alan Schankel wrote in a morning research note.
“Ratios for 10 and 30 years ended at 94% and 104%,” he wrote, “below Tuesday’s high points, but still well above the past year’s average.”
Also, Schankel added, yields for triple-A-rated Montgomery County, Md., which sold a two-part competitive issue despite being on Moody’s shortlist for a possible ratings downgrade, came in right in line with triple-A benchmarks.
In economic news, the Labor Department reported Thursday that initial jobless claims fell to 400,000 for the week ending July 30. And continuing claims for the week ending July 23 rose to 3.73 million.
Economists had predicted 405,000 initial jobless claims and 3.70 million continuing claims, according to the median estimate from Thomson Reuters.
