Light activity and a slight weakening of yields at the five-year mark characterized the municipal bond market Friday morning.
The secondary market has seen a slow flow of bid-wanteds to start the day's session, traders noted. Tax-exempt yields appeared steady across most of the curve, yet up to one basis point higher in three-to-five-year maturities, according to one industry gauge.
Still, the market is coasting from a week of solid appetite for new issuance, a trader in New York said.
"It looks like munis overall performed pretty well against Treasuries this week," he said. "With Treasuries backing off so much, munis held their own a little bit better here. Supply looks like it is manageable for the underwriters, so things should stay where they are unless Treasuries continue to back up further."
The primary market has held sway throughout the week, with deals oversubscribed and yields on various deals' maturities falling between retail and institutional pricings. Traders reported that new issuance was generally very well-received.
Primary market supply is expected to come in at just under $8 billion for the coming week. That falls roughly in line with the amount the market has been seeing lately, and is something industry watchers say should be easily absorbed.
The secondary market started the week with modest activity, traders added, but soon gave way to interest in the primary. By Thursday, wider bid-ask spreads slowed activity on all but specific block trades of high quality.
The market got yet another strong signal from muni bond fund flows for the week ended Oct. 17. Weekly reporting muni bond funds saw the 27th consecutive week of inflows, taking in $621 million.
Tax-exempt yields ended Thursday's session unchanged, according to the Municipal Market Data scale read. The benchmark triple-A 10-year yield closed flat at 1.74%.
The 30-year yield held steady at 2.86%. The two-year remained at 0.30% for the 17th consecutive trading session.
Treasuries yields Friday morning mostly slipped a few paces from their upward trajectory this week. The benchmark 10-year yield has slid two basis points to 1.82%.
The 30-year yield has dropped one basis point to 3.01%. The two-year yield remains at 0.30%.