The tax-exempt market headed slightly lower, following Treasuries, after May non-farm payrolls growth came in slightly better than expected.
Payrolls in May were up 175,000 after a downwardly revised April number. The May unemployment rate rose slightly to 7.6% from 7.5% as the labor force expanded.
"This report shows job growth about in line with recent trends, which should ease concerns over the impact of the fiscal drag on the economy," wrote economists at RDQ Economics. "The rise in the unemployment rate in May is not a sign of weakness because it reflected a strong inflow into the labor force, which masked a surge in household employment. This payroll gain is likely not strong enough to push the Fed to taper asset purchases as soon as the June FOMC meeting. We continue to expect the Fed to begin tapering purchases in September."
A risk-on trade following the positive figures pushed bonds lower. In Treasuries, the benchmark 10-year yield rose three basis points to 2.11% and the 30-year yield increased four basis points to 3.27%. The two-year was steady at 0.30%.
Munis followed. "I hear it's quiet with slight cuts," a New York trader said. "There are some big blocks out for the bid. Let's see how they do."
In the muni market Thursday, the Municipal Market Data curve flattened as yields on the short end rose and yields on the long end fell. The 10-year and 30-year yields slid one basis point each to 2.11% and 3.28%, respectively. The two-year was steady at 0.30% for the fourth session.
Yields on the Municipal Market Advisors 5% scale ended mixed. The 10-year yield slid one basis point to 2.17%. The 30-year was steady at 3.40% for the second session and the two-year finished unchanged at 0.36% for the seventh session.