Activity in the tax-exempt market began to slow Friday morning as municipal bonds continued to take direction from Treasuries.
Traders continued to say the market was in limbo - waiting for clarity regarding the election and the fiscal cliff. "It's slow on this Friday," a New York trader said. "It feels as if we're in this continued wait-and-see what is going to happen with the election. So we're getting some business done and orders are getting executed but still business has been slow for most of month."
The trader added muni yields will follow Treasury yields until some more clarity is provided on the economist. "Everyone is worried about this fiscal cliff that neither candidate wants to address."
On Thursday, the Municipal Market Data scaled ended weaker. The benchmark 10-year muni yield rose three basis points to 1.75% while the 30-year yield rose two basis points to 2.85%. The two-year remained at 0.30% for the 22nd straight trading session.
Treasuries were stronger Friday morning. The benchmark 10-year yield fell four basis points to 1.79% while the 30-year yield dropped three basis points to 2.95%. The two-year yield fell two basis points to 0.31%.
In economic news, real gross domestic product increased at an annual rate of 2% in the third quarter of 2012, beating analyst expectations of 1.8%.
"The economic recovery continues but at a very sluggish pace," wrote analysts at RDQ Economics. "Over the first 13 quarters of the recovery, real GDP growth has averaged only 2.2% and, at 2.3%, the pace of growth over the last year has shown no signs of picking up."
They added, "Outside of housing, this is a fairly dismal report that suggests the economy's potential to grow is sub-2%. The economy simply does not have enough momentum to absorb the shock from going over the fiscal cliff without going into recession in 2013."