NEW YORK — Muni yields are backing up slightly amid quiet trading as the stock market attempts to secure a fifth straight gain.
“Guys are looking for something out of the ordinary, a callable bond or maybe a higher-yielding bond, something to get an edge,” a trader in Chicago said. “But it’s like skating on ice with rollerblades on – it’s hard to get an edge.”
Tax-exempts maturing between 2015 and 2025 have seen yields rise a basis point in early trading, while other maturities are flat, according to Municipal Market Data.
Treasuries are providing guidance to soften as the benchmark 10-year yield is up three basis points at 2.11%, the two-year is flat at 0.19%, and the 30-year yield is a single basis point higher at 3.66%.
Meantime, the Dow Jones Industrial Average is up 88 points in the first hour of trading, adding to the 441 point gain from Monday to Thursday.
Another factor guiding muni rates higher is the prospect of more supply: The Bond Buyer’s 30-day visible supply ticked up to $11.347 billion Thursday from $11.197 billion a day before. As recently as August 26 it was just $3.5 billion.
“The Treasury market is off a bit, and a lot of supply is coming, so people might be waiting to see what comes next week,” the trader added.
Major deals next week include a $2.6 billion general obligation deal from California, a $265 million offering from Arizona’s Salt River Project, a $260 million deal from Connecticut’s Health and Educational Facilities Authority, and a $250 million refunding deal from Wisconsin.
Tax-exempt yields have weakened the past two days, coming off record lows earlier in the week. The 10-year muni yield backed up five basis points over the last two sessions to 2.12% and the 30-year yield moved four basis points higher to 3.70%.
The two-year yield, after holding steady for 25 consecutive sessions at its lowest level in more than 40 years, rose two basis points Thursday to 0.32%.
Muni-Treasury ratios finished Thursday lower but levels remain attractive enough to draw in crossover buyers. The 10-year ratio is 101.4%, the lowest of September. The 30-year ratio is 110.1%.
Triple-B rated munis currently offer an absolute yield of 4.17%, MMD says, or 199.5% of the 10-year Treasury rate. Earlier in the month that ratio was as high as 214.6%.
