NEW YORK — The municipal market is taking last call right now. Traders report colleagues leaving early amid quiet trading and average volume in the secondary.
Many are thinking about how Federal Reserve Board chairman Ben Bernanke’s speech achieved little after great anticipation, a hurricane is barreling north along the eastern seaboard, the Labor Day weekend looms, and next week’s new issuance resembles crumbs.
“Most people have hung it up and called it a week,” a trader in New York said. “Everyone was kind of on hold with Bernanke’s speech, which didn’t have any real substance to it. Treasury markets are in a holding pattern. So, munis definitely are in a holding pattern.”
The market received little push from the statement issued by Bernanke, at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyo. In it, he made no overt claims to promote another round of quantitative easing. Some in the marketplace saw in the language of the Aug. 9 Federal Open Market Committee an indication that Bernanke might flood the financial markets with money a third time to stimulate the economy.
Bernanke did, though, say it was rather likely that the federal funds rate would be held to a zero-to-25-basis-points range “for at least two more years.” The muni market response was mostly muted.
Secondary volume stands just over $5 billion heading into the afternoon, the trader added. The number is average or a Friday in late August.
Tax-exempt yields are steady across the front and back ends of the curve, according to the Municipal Market Data scale. Securities maturing between 2018 and 2032 were flat to one basis point higher.
Muni triple-A general obligation yields have fallen considerably throughout the calendar year, according to MMD numbers.
Treasury yields were firmer midway through Friday’s session. The 10-year benchmark yield, after sliding seven basis points Thursday, has dropped another three basis points to 2.20%.
The 30-year yield, after slipping five basis points Thursday, has fallen another five basis points to 3.55%. The two-year yield has ticked down two basis points to 0.20%.
The 10-year muni yield held at 2.25% at Thursday’s close, after rising 10 basis points in two days from its all-time low.
The 30-year muni yield was unchanged at 3.88%. The two-year yield also remained at 0.30% for a 12th straight session, hovering at its lowest yield in more than 40 years.
New issuance, historically low ahead of the Labor Day weekend, is expected to be anemic. According to industry estimates, municipal bond sales scheduled for next week total $1.2 billion, compared to a revised $3.5 billion this week.
