NEW YORK — If the municipal market were looking for a sign that the economy was leaning toward recovery or further weakness, it got it Friday morning.
Job creation, a central driver of the economy, was mostly flat, according to the latest report from the U.S. Bureau of Labor Statistics. And Treasury yields immediately took on water. The five-year dropped 19 basis points in four minutes after the report was released, from 1.78% down to 1.59%. It continued to 1.57%. It settled at 1.60%.
Non-farm payrolls grew by a mere 18,000 jobs in June, well under what was expected after so positive an ADP employment survey released Thursday, according to the BLS report. The unemployment rate ticked up to 9.2%. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down.
But muni yields so far haven’t reacted much to the employment report. They remained steady for maturities in 2013 and 2014, as well as those in 2018 and 2019, according to the Municipal Market Data scale. But yields for the rest of the curve were flat to up to two basis points lower.
The benchmark 10-year muni yield increased one basis point to 2.77% at Thursday’s close. The 30-year yield rose two basis points to 4.39%.
The two-year yield ended Thursday unchanged at 0.42% for the 18th straight session. Previously, it had remained at 0.44% for 17 consecutive sessions.
Treasury yields opened the day slightly higher. Then the BLS released its employment report and yields began to plummet. The 10-year yield dropped 11 basis points from yesterday’s close to 3.04%.
The two-year yield fell nine basis points to 0.39%. The 30-year yield lost seven basis points to 4.31%.
Activity in the secondary is subdued. About $1.1 billion in munis has traded in the morning, a trader in New York said. But dealers offering block syndicate pieces have adjusted some levels in otherwise limited trading.
“Some of the block-size syndicate balances from the dealers seem to look attractive,” he said, “especially around the 10-year range, with some being close to 90% to 100% of Treasuries at this point.”
