NEW YORK – Treasuries are firmer in early trading but muni buyers have no inclination to follow due to political inaction in Washington.
“Not a great deal is happening,” said a trader in Florida. “We continue to see a lot of the investable dollars go to paper five years and in, primarily as a safety trade.”
He said significant balances are still sitting in dealer hands and it’s causing some concern.
“I haven’t seen traders pull back yet, but the point is that a lot of the paper hasn’t been sold yet,” he added. “A lot of buyers are sitting on their hands.”
Asked if munis could benefit from a flight to quality, he said: “if anything we’re unchanged, maybe a touch weaker. There is definitely no inclination to follow Treasuries.
An early read from Municipal Market Data showed triple-A yields were mostly steady except for a one basis point rise on bonds maturing between 2021 and 2024.
Intermediate and long-term muni yields have been rising slowly the past two weeks. The 10-year finished Wednesday at 2.69%, compared with 2.66% on July 20, while the 30-year closed at 4.37%, versus 4.30% on July 14.
In tune with the trader’s comments, the two-year yield has stayed at a calendar year low of 0.40% since July 12.
Despite continued gridlock on Capitol Hill and the fast approaching debt ceiling deadline, Treasuries were slightly firmer in early trading with the benchmark 10-year yield three basis points lower at 2.95%. The two year and 30-year yields were each two basis points firmer at 0.43% and 4.28%, respectively.
Two positive economic reports helped buoy the stock market early morning.
Initial jobless claims fell 24,000 in the week ending July 23 to 398,000 – the first week under the 400,000 mark since early April. And, the pending home sales index ticked up 2.4% in June, helping the year-over-year sales number gain 19.8%.
The S&P 500, coming off four days of losses including the worst day in more than six weeks Wednesday, was up 5.6 points after an hour of trading.
