NEW YORK — This week’s small calendar and holiday have combined to produce a quiet Wednesday morning for the municipal market.
“It’s a time right now when activity is very light,” said a trader in New Jersey.
Muni yields remain steady across the short and long ends of the curve, according to the Municipal Market Data scale. But maturities between 2026 and 2032 are flat to one basis point lower.
The two-year yield held to end yesterday’s trading session at 0.42% for the 16th straight session. The benchmark 10- and 30-year muni yields remained at 2.76% and 4.36%, respectively.
Treasury yields continue to slide gradually, starting the morning down slightly. The 10-year yield dropped four basis points to 3.09%.
The two-year yield slipped one basis point to 0.43%. The 30-year yield fell three basis points to 4.36%.
Following several days of weakening, Treasuries have begun to inch downward. But the drop is interpreted as little more than a reaction to the fact that the bond market had weakened a little bit over the last couple of days, the trader said.
Treasuries’ recent rally is reflected in their ratios with munis. On Tuesday, munis underperformed as the muni-Treasury ratio finished higher, according to MMD analyst Daniel Berger.
The 10-year muni-Treasury ratio increased to close at 88.2%. The 30 year closed at 99.3%. “Simply put,” he said, “the muni market finished unchanged while Treasuries rallied five basis points in the two-to-three-year range, 10 basis points for five years, seven basis points for 10 years, and one basis point for 30 years.”
That’s not particularly cheap, the trader said. But it’s not considered rich until the ratio gets below 85%, he added.
“But here, there’s no perceived value in munis versus Treasuries at an 87% ratio,” the trader said. “Right now, munis probably, on a relative basis, tend to be somewhat rich. When we start to get more supply, we’ll start to see some continued weakness in our market.”
