NEW YORK — The secondary market for muni bonds has quieted down Friday morning. By comparison, traders watched a veritable feeding frenzy Thursday, where every bit of supply in the secondary that wasn’t bolted down disappeared.
“We’re returning to where we’ve seen activity recently,” a trader in New York said. “We’re about $1.8 billion for the day so far, which is about 85% of the last 30 days, about normal for a Friday. We’re still seeing a good amount of bonds trading, still seeing a little bit of tightening coming in.”
Tax-exempt yields are finding their way Friday morning, after intense firming Thursday. They are steady out to 13-years, according to the Municipal Market Data scale. Beyond that, yields are flat to two basis points stronger.
The 10-year muni yield Thursday dropped 12 basis points to a record low of 1.97%. The 30-year yield plummeted 18 basis points to 3.44%.
The two-year yield stayed at 0.32% for a sixth straight session.
Treasury yields started the day’s session a speck weaker on the intermediate and long end. This follows some heavy rallying in those areas of the curve the past couple of sessions.
The benchmark 10-year Treasury yield, after falling 21 basis points over the past two days to its lowest yield in many decades, has risen two basis points to a still almost incomprehensible 1.75%.
The 30-year yield, which plunged 40 basis points over the same period, has ticked up a basis point to 2.81%, still its lowest level since Dec. 17, 2008. The two-year yield has held steady at 0.21%.
The market expects a slight decrease in new issuance for next week, after a substantial increase in volume this week. Next week, the market anticipates an estimated $6.83 billion in new supply. This week saw a revised $7.86 billion of issuance.
Municipal bond mutual funds saw inflows for a third consecutive week, after six consecutive weeks of outflows. The week ending Sept. 21 saw $296 million in inflows from muni bond funds that report their flows weekly, according to Lipper FMI.
Flows are lighter than those of the previous week. In the week ended Sept. 14, there were net inflows of $470 million.
High-yield muni funds have also seen their second consecutive week of inflows after six straight weeks of outflows. Funds that report weekly saw inflows of $119 million. The previous week, high-yield funds reported inflows of $104 million.
