NEW YORK — With a weekend and a storm bearing down, investors have lined all of their bids up to go off well before noon, eastern time, indicating a session that will be light and finish early.
Furthermore, Chairman Ben Bernanke, at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyo., made no overt claims to promote another round of quantitative easing. Some in the marketplace saw in the language of the Aug. 9 Federal Open Market Committee an indication that Bernanke might flood the financial markets with money a third time to stimulate the economy.
Bernanke did, though, say it was rather likely that the federal funds rate would indeed be held to a zero-to-25-basis-points range “for at least two more years.” The muni market showed little energy in response, a trader in Florida said.
“Overall, the marketplace saw this as disappointing, yet expected,” he said of the market’s reaction to the Fed chairman’s speech. “You see that by the muted action at this point.”
Tax-exempt yields were steady across the front and back ends of the curve Friday, according to the Municipal Market Data scale. Securities maturing between 2018 and 2027 were flat to one basis point higher.
Muni triple-A general obligation yields have fallen considerably throughout the calendar year, according to MMD numbers.
Treasury yields, as though taking their cue from Thursday’s session, continued to firm early in Friday’s session. The 10-year benchmark yield, after sliding seven basis points Thursday, has dropped another five basis points to 2.18%.
The 30-year yield, after slipping five basis points Thursday, has fallen another five basis points to 3.55%.
The two-year yield has ticked down one basis point to 0.21%.
The 10-year muni yield held at 2.25% at Thursday’s close, after rising 10 basis points in two days from its all-time low.
The 30-year muni yield was unchanged at 3.88%. The two-year yield also remained at 0.30% for a 12th straight session, hovering at its lowest yield in more than 40 years.
Investors pulled money from municipal bond mutual funds for a fifth straight week.
The week ending Aug. 24 saw $148 million in outflows from muni bond funds that report their flows weekly, according to Lipper FMI.
The withdrawals are down from those of the previous week. In the week ended Aug. 17, there were net outflows of $323 million for muni bond funds.
In addition, high-yield muni funds also saw their fifth straight week of outflows — after seeing inflows for nine of the previous 11 weeks. But the amount leaving high-yield muni funds is falling.
Funds saw outflows of $35 million, Lipper reported. The previous week, high-yield funds reported outflows of $179 million.
In economic news, the Commerce Department reported Friday that real gross domestic product expanded at a 1.0% annual rate in the second quarter. This was revised lower from the 1.3% initial estimate as consumer spending ticked upward.
Consumer spending rose 0.4% for the quarter, revised up from the 0.1% rise estimated in the initial GDP reading in July. Inventory investment and exports were revised lower.
Core personal consumption expenditures increased 2.2% for the quarter, revised upward from a 2.1% gain. This represents the largest increase in core PCE since the second quarter of 2008.
Economists polled by Thomson Reuters predicted GDP to be revised to 1.1% and for PCE to increase 2.1%.
