NEW YORK — The quiet before the holiday weekend storm on Friday has left a void for municipal market traders looking to unload inventory in the secondary.
Few traders are around to field orders, a trader in Florida said. Dealers got overly bullish 10 to 15 basis points ago, he noted, and are carrying a lot of inventory. But the combination of fewer bidders and Treasuries getting weaker has widened muni spreads.
“It’s a holiday weekend; and not a lot of people are around,” the Florida trader said. “The inside of the market is softer. Guys are bidding cheap, hoping they can buy some bonds below where they’ve been trading.”
Muni yields continued to rise at the longer end of the curve to start the day, according to Municipal Market Data. Tax-exempts maturing between 2012 and 2017 were steady. Yields for maturities between 2018 and 2041 are flat to two basis points higher.
Both the benchmark 10- and 30-year muni yields soared five basis points to 2.75% and 4.35%, respectively. The two-year yield held at 0.42%, holding for the 14th straight session.
Treasury yields pushed higher for most of the week. But they started the morning a tad lower. The 10-year yield dropped two basis points to 3.15%. The two-year yield slipped one basis point to 0.46%. The 30-year yield inched down two basis points to 4.36%.
This week’s numbers for muni bond funds showed net inflows of $163 million for funds that report weekly, according to Lipper FMI. By registering inflows in three of the last four weeks, muni funds may be demonstrating that the recent streak of 29 weeks of outflows is over. But in the market environment, it’s neither forgotten, nor really out of view.
Still, the news is positive, as are general bond fund numbers. The four-week moving average for all funds that report their flows weekly was positive for the first time in more than 30 weeks. Also, high-yield muni funds continued their strong showing over the past two months with inflows. That makes seven out of the past eight weeks they’ve seen positive flows.
