NEW YORK – The tax-exempt market was firmer Friday for the third straight session after weakening earlier in the week. After the market digested supply, munis followed Treasuries higher.

Munis were firmer Friday morning after a choppy week, according to the Municipal Market Data scale. Yields inside six years were steady while yields outside seven years fell as much as two basis points.

On Thursday, the 10-year yield fell two basis points to 1.87% while the 30-year yield dropped one basis point to 3.17%. The two-year was steady at 0.32% for the 10th straight session.

Treasuries were stronger after a weaker session Thursday. The benchmark 10-year yield dropped seven basis points to 1.56% while the 30-year yield fell five basis points to 2.68%. The two-year yield fell two basis points to 0.29%.

In economic news, industrial production fell 0.1% in May, while capacity fell slightly to 79.0%. Both readings failed to meet economists’ expectations. Economists had predicted a 0.1% rise in production and 79.2% capacity use.

“After very strong growth in manufactured output from June of last year through February of this year, we have seen a modest contraction in manufacturing activity since February as a result of a drop in the production of nondurable goods,” wrote analysts at RDQ Economics. “U.S. manufacturing cannot be immune from the turmoil in Europe and slowing in China and some other parts of Asia. However, we think U.S. activity has held up remarkably well in manufacturing given global developments and we expect the sector to continue to expand over the rest of the year given very low inventory levels and our projection of continued expansion in the domestic demand in the U.S.”

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