NEW YORK — Holiday-lightened staffs on municipal bond desks have led to limited trading activity so far Friday.
This, in turn, has made reads on yields difficult, traders say. Continuing into a second day, the Rosh Hashanah celebration appears to have cut desks’ staffs enough to keep the activity one-sided.
“Today, it’s really quiet, maybe a little bit busier than yesterday, but not much,” a trader in California said. “It’s hard to get a good read on things. The bid side isn’t really a good indicator of where the market is because you’re dealing with such abbreviated staffs out there.”
Tax-exempt yields are mixed across the curve crossing into the afternoon, according to the Municipal Market Data scale. They are steady through six years, and from between 14 and 22 years.
Between seven and 13 years, they are flat to two basis points higher. And those yields beyond 22 years are flat to two basis points lower.
The 10-year muni yield climbed three basis points in Thursday’s session to 2.21%. It has more than erased the rally gains that brought it to a record low of 1.97% late last week.
The 30-year yield ticked up one basis point on the day to 3.56%. The two-year yield held for a second session at 0.34%.
Treasury yields were mostly firmer by early afternoon, departing from most of the past five sessions. For roughly the past week, rates have climbed and reversed gains from the incredible rally at the intermediate and longer parts of the curve the previous week.
The benchmark 10-year Treasury yield has firmed four basis points to 1.95%. The 30-year yield, which plunged as much as 53 basis points last week before weakening significantly, has fallen eight basis points to 2.97%.
The two-year yield has held fast at 0.27%.
The market expects a boost in new supply in the coming week. Next week is expected to see $8.26 billion of volume. This week, the market saw a revised $7.69 billion in new issuance.
Municipal bond mutual funds saw inflows for a fourth consecutive week, roughly doubling last week’s numbers. The week ending Sept. 28 saw almost $600 million in inflows from muni bond funds that report their flows weekly, according to Lipper FMI.
In the week ended Sept. 21, there were net inflows of $296 million.
Within the numbers, intermediate funds had the strongest performance, according to RBC Capital Market’s Chris Mauro. They drew $220 million, or 0.33% of assets, compared with $62 million during the prior week. Long-term funds also were up from the previous week, Mauro noted. They saw net inflows of $158 million, compared with $54 million in the week ended Sept. 21.
But the numbers mostly underscored the continued strength in short- and intermediate-fund flows, he added. For their part, short funds recently have been reporting far and away the heaviest flows.
