NEW YORK – Activity in the tax-exempt market was slow Friday morning as dealers recovered from the year-to-date’s largest week of new issuance.
“It’s very quiet so far this morning,” a New York trader said.
Munis were steady to slightly weaker Friday morning, according to the Municipal Market Data scale. Yields inside eight years were steady while the nine-year to 20-year yields rose up to one basis point. Outside 21 years, yields were steady.
On Thursday, the two-year yield ended steady at 0.26%, its record low first recorded by MMD on Feb. 16. The 10-year yield increased five basis points to 1.90% while the 30-year yield jumped four basis points to 3.27%.
Treasuries were firmer Friday morning. The two-year yield fell one basis point to 0.30%. The benchmark 10-year and the 30-year yields fell four basis points each to 1.99% and 3.11%, respectively.
On Thursday, JPMorgan priced for institutions $2 billion of California various-purpose general obligation refunding bonds.
“It's rewarding to ease taxpayers’ burden in these tough economic and fiscal times,” said State Treasurer Bill Lockyer, noting the refunding deal will save $250 million in debt service payments. “With the state still fighting to keep its budget in the black, every bit of savings helps.”
Over the past week, ratios have fallen as munis outperformed Treasuries and became more expensive. The 10-year ratio Thursday closed down at 93.6% from 94.4% the week prior. The 30-year ratio ended at 103.8%, down from 104.8% the week before.
The five-year ratio rose to 77.8% on Thursday from 75.6% the week prior as munis on the short end underperformed Treasuries.
The slope of the yield curve also fell throughout the week. The 10- to 30-year slope fell to 137 basis points on Thursday from 138 basis points the week prior.
