NEW YORK – The tax-exempt market was firmer, following Treasuries, as the risk-off trade stemming from Europe continued to grab headlines.
One trader noted that while the Municipal Market Data scale showed prices being bumped, some bonds in the market weren’t trading firmer. “Stuff is trading but not higher,” a New York trader said.
Indeed, munis appeared stronger Thursday morning, according to the MMD scale. Yields inside six years were steady while yields outside seven years fell as much as two basis points.
On Wednesday, the 10-year yield fell three basis points to 1.80% while the 30-year yield dropped four basis points to 3.10%. The two-year yield closed steady at 0.33% for the sixth consecutive trading session.
Treasuries were much stronger Thursday with the benchmark 10-year yield dropping four basis points to 1.58%, setting a record low. The 30-year yield plunged five basis points to 2.66%. The two-year yield fell one basis point to 0.27%.
In the primary market, Morgan Stanley is expected to price $174.1 million of Massachusetts Educational Financing Authority educational loan revenue bonds, rated AA by Standard & Poor’s and A by Fitch Ratings.
Goldman, Sachs & Co. is expected to price $154.1 million of Love Field, Texas, Airport Modernization Corp. Southwest Airlines special facilities revenue bonds, rated Baa3 by Moody’s Investors Service and BBB-minus by Standard & Poor’s.
In the competitive market, Virginia Transportation Board is expected to auction $600 million of revenue bonds, rated Aa1 by Moody’s and AA-plus by Standard & Poor’s and Fitch.
Massachusetts Water Pollution Abatement Trust is expected to auction $115 million of triple-A rated revenue bonds, following a $250 million pricing launched earlier this week in the negotiated market.
In economic news, real gross domestic product increased at an annual rate of 1.9% in the first quarter, downwardly revised from the 2.2% increase reported in the advance estimate last month. The increase was in line with analyst expectations. Growth was 3.0% in the fourth quarter of 2011.
“While the headlines will read real GDP growth lowered to 1.9% in the first quarter from an initially reported 2.2%, the real news is the implied income estimate of GDP, which rose 2.7% in the first quarter versus a gain of 2.6% in the fourth quarter,” wrote economists at RDQ Economics. “The recovery on either measure is very anemic but the average growth rate of 2.8% since the recession ended is nonetheless a stronger reading than expenditure estimate gain of 2.4% and better explains the decline in unemployment.”
In other economic news, seasonally adjusted initial jobless claims climbed 10,000 to 383,000 for the week ended May 26 while continuing claims fell 36,000 to 3.242 for the week ended May 19. Economists had predicted 370,000 claims and 3.250 million continuing claims.
“Following three consecutive declines the four-week average of claims moved higher in the fourth week of May, although the average level of initial claims thus far in May stands 9,000 below April’s average,” RDQ economists wrote. “The decline in initial claims between April and May points to some slowing in the pace of job loss and we look for total nonfarm payrolls to have risen 165,000 in May, stronger than March and April’s average job gain of 135,000.”
