The tax-exempt market was much stronger Friday morning, following Treasuries, even as yields hovered at or near record lows.
Munis were stronger Friday morning, according to the Municipal Market Data scale. Yields inside six years were steady while the seven- to 12-year yields fell as much as two basis points. Outside 13 years, yield dropped as much as three basis points.
On Thursday, the two-year yield closed flat at 0.31% for the fourth consecutive session. The 10-year yield finished steady at 1.73% for the fourth straight session, closing six basis points above its record low of 1.67% set Jan. 18. The 30-year yield fell one basis point to 2.90%, setting a record low as recorded by MMD. The previous record was 2.91% set Wednesday.
Thursday marked the 19th consecutive trading session where munis have traded steady or firmer. Since this most recent rally began on June 22, yields on the 10-year have fallen 13 basis points while the 30-year yield has plunged 26 basis points.
Treasuries were much stronger. The benchmark 10-year plunged six basis points to 1.46% while the 30-year yield plummeted seven basis points to 2.55%. The two-year yield increased one basis point to 0.23%.
Since the most recent rally began on June 22, ratios have risen on the short and intermediate part of the curve as munis underperformed Treasuries. Munis rallied, but lagged the Treasury rally. The five-year muni-to-Treasury ratio rose to 114.5% on Thursday from 105.3% on June 22. The 10-year ratio increased to 113.8% from 111.4%.
Ratios on the long end fell as munis outperformed their taxable counterparts. The 30-year ratio fell to 110.7% on Thursday from 114.9% on June 22.
The slope of the yield curve has flattened since the beginning of the year and continued that trend since June 22. The one- to 30-year slope flattened to 270 basis points on Thursday from 296 basis points. The one- to 10-year slope flattened to 153 basis points from 166 basis points on June 22.