The municipal bond market continues to hold its levels in the shadow of a stronger Treasury market at the long end of the yield curve.
Treasuries have reported yields falling at the long end of the curve and rising at the short end in response to strong final gross domestic product numbers for the third quarter. Munis, hindered by fewer market participants at their desks and light activity, appear listless by comparison, a trader in Illinois said.
"It doesn't feel like we're following Treasuries right now," he said. "The bid side is still there, but the demand in the open market just isn't. We haven't seen many offerings get lifted out there today. We're definitely lagging, if for nothing else, just because the volume is down so much. People are out."
Treasury yields have also been moving in response to the Federal Reserve's Wednesday announcement that it will begin tapering its bond buying.
The market expects slight issuance to arrive during the holiday week. Potential volume for next week should total about $15 million, down from total sales of $2.80 billion this week.
There are no competitive deals scheduled, after $765.4 million sold this week, based on figures by Ipreo, The Bond Buyer and Thomson Reuters. This past week, $1.84 billion arrived on the negotiated side of the ledger.
On the demand side, muni bond mutual funds recorded a 30th straight week of outflows from weekly reporting funds, according to Lipper FMI numbers. They reported outflows of $1.71 billion for the week of Dec. 18, down from outflows of $1.90 billion one week earlier.
Industry watchers suggest that the past two weeks' $3.61 billion flowing from muni bond funds, a large uptick from the previous few months' numbers, mostly have stemmed from tax-loss selling on the part of investors.
Yields on the Municipal Market Data triple-A scale Friday appeared steady across the curve in a morning read; they have not been updated.
The triple-A, tax-exempt 10-year closed Thursday four basis points higher at 2.75%. The 30-year rose two basis points to 4.18%. The two-year yield held at 0.33% for a 25th consecutive session.
Yields on the Municipal Market Advisors benchmark triple-A scale weakened mostly beyond three years on the curve by as much as four basis points. The 10-year rose three basis points to 2.77%. The 30-year increased two basis points 4.42%. The two-year held at 0.36%.
Treasury yields have risen at the short end of the yield curve and fallen thereafter so far in Friday's session. The benchmark 10-year yield has declined four basis points to 2.90%, while the 30-year yield has dropped six basis points to 3.85%.
The two-year has inched up one basis point to 0.38%, and gained five basis points on the week.
In economic news, the Commerce Department reported 4.1% growth in U.S. GDP for the third quarter, a 0.5-point upward revision to the previous estimate.
The uptick, calculated in the GDP's third revision, dovetails with the reported improvement in payrolls growth. GDP rose at its fastest pace since the fourth quarter of 2011.