NEW YORK – Munis were weaker Friday morning, following Treasuries, as positive employment data forced the risk-on trade.
“We are down,” said a New York trader. “But in down markets muni traders get a bit scared. Muni traders are much better in trading up markets.”
The Municipal Market Data scale had yet to be updated by press time. On Thursday, the two-year yield closed steady at 0.30%, matching its record low set Oct. 10. The five-year muni yield set a new record low of 0.66%, beating its previous record of 0.68% set Wednesday. The 30-year yield fell three basis points to 3.14%, tying its record low set Tuesday.
The 10-year muni yield was the anomaly, rising one basis point to 1.69%, closing two basis points higher than its low of 1.67% set Jan. 18.
Treasuries were much weaker Friday morning on the positive employment report. The two-year rose one basis point to 0.24%. The benchmark 10-year yield jumped 11 basis points to 1.94% while the 30-year spiked 13 basis points to 3.15%.
In economic news, non-farm payroll employment rose 243,000 in January, pushing the unemployment rate down to 8.3%. The unemployment rate is the lowest since February 2009, the Labor Department said.
The 243,000 increase was higher than the 150,000 estimated by economists and the 8.3% unemployment level was lower than the 8.5% projected.
“Despite our view that the unemployment rate overstates the good news in the labor market because of the drop in labor force participation, this is nonetheless a very solid employment report,” wrote economists at RDQ Economics. “We believe that consensus expectations for growth are understating the rising momentum in the economy. These data only further underscore the foolishness of the Fed’s promise to keep rates on hold until late 2014 – how can the Fed see that far into the future?”