NEW YORK — The muni market decided to sleep in Friday morning. Traders noted little activity after so dramatic a week of bond-grabbing in both the primary and secondary markets.
Muni yields appear to be holding this week’s gains. They are steady across the curve to start Friday’s session, according to the Municipal Market Data scale.
The benchmark 10-year yield skipped down three basis points Thursday to 1.97%. It has fallen 61 basis points since Oct. 12, and equals the lowest point it’s reached in 2011 — a level it last saw on Sept. 23.
The tumble lowered its ratio to Treasuries to 100% from 106.37% three days ago, considerably closer to the 2011 calendar-year average of 97.26%.
The muni-Treasury ratio has gotten richer recently, falling 18 percentage points in 10 sessions since Nov. 23, and 28 percentage points from its calendar-year high of 128.42%, achieved on Oct. 5.
The two-year muni yield held fast at 0.36% for a second straight session. The 30-year ticked down one basis point to 3.69%.
Treasury yields started the day’s session tentative, lethargic, and mixed. The benchmark 10-year yield inched up a basis point to 1.98%.
The two-year yield held steady at 0.23%. The 30-year yield skipped down one basis point to 2.99%.
Investors flooded municipal bond mutual funds with cash this past week. Muni bond funds saw their heaviest inflows since March 10, 2010.
The week ending Dec. 7 saw about $1.04 billion in inflows from muni bond funds that report their flows weekly, according to Lipper FMI. In the week ending Nov. 30, there were net outflows of $297 million.
High-yield muni funds saw inflows this past week, as well, after two straight weeks of outflows.
Funds that report weekly saw inflows of $56.5 million, Lipper said. The previous week, high-yield funds reported outflows of $133 million.
Finally, the muni market is now officially larger by $840 billion. That’s because the Federal Reserve in its third quarter data on fund flows released on Thursday raised the total amount of muni bonds outstanding to $3.7 trillion, retroactive to the first quarter 2004. Previously, it had calculated the total at roughly $2.9 trillion.
The Fed attributed the difference to a recalculation of individual holdings of municipal bonds. This revision increases the amount of individual holdings to 51% of total bonds outstanding, Janney Capital Markets’ Alan Schankel wrote in a research post.
“If mutual funds and similar products are included, the amount of individual holdings jumps to $2.8 billion or 75% of outstanding munis,” Schankel wrote. “No other major asset class has such high percentages of individual ownership.”
