The tax-exempt market started to show apathy Friday morning as the market weakened, following Treasuries.
“The long end is much softer,” a Chicago trader said. “The bid side that was fading yesterday has kept fading. Fund flows this week were strong, but the weak Treasury market at the beginning of the trading day means we opened softer and that's remained the case.”
He added there is also some selling pressure stemming from the large primary calendar this week. “The large new issue deals from this week opening weaker just took the fight out of buyers.”
In the primary market, Piper Jaffray is expected to price $149 million of taxable North Orange County, Calif., Community School District bonds, rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s.
Most reads on the municipal bond market showed weakening Thursday.
The Municipal Market Data scale ended slightly weaker Thursday. The 10-year and 30-year yields jumped two basis points each to 1.69% and 2.74%, respectively. The two-year finished steady at 0.33% for the sixth session.
The Municipal Market Advisors 5% coupon triple-A benchmark scale also showed weakening. The 10-year yield rose two basis points to 1.72% while the 30-year yield increased one basis point to 2.82%. The two-year was steady at 0.34% for the eight consecutive trading session.
Treasuries opened Friday morning much weaker. The benchmark 10-year yield and the 30-year yield soared seven basis points each to 1.92% and 3.11%, respectively. The two-year yield rose one basis point to 0.27%.
In economic news, sales of new single-family houses fell 7.3% to 369,000 in December. The drop in December came in below economists’ expectations of 386,000.
“New home sales are volatile, revision prone, and one of the less well measured government series,” wrote economists at RDQ Economics. “Although the decline from the significantly upwardly revised November reading comes as a disappointment, it does little to change the picture of a housing recovery. Our view is the weight of evidence points to continued improvement in the new housing market.”
