A sizeable anticipated calendar, an end to the standoff in Washington and cash-laden investors have provided some downward momentum to yields in the municipal market.
Retail activity, measured through trade counts, has increased over the past two sessions, according to a trader in Texas. The market's starting to accelerate in the face of attractive levels, he said.
"The market looks a little stronger here," the trader said. "Deals are little bit stronger, maybe up to three basis points. It's cash that's accumulating, and tax-exempt yields are still pretty attractive compared to taxable."
The market should see more issuance next week. The Bond Buyer's 30-day visible supply on Wednesday showed $9.82 billion expected to arrive.
Large deals have started to line up, including competitive and negotiated general obligation offerings from Pennsylvania, Minnesota and California, as well as credits from the New York City Transitional Finance Authority.
"Now, you'll probably see some refunding activity pick up, so that calendar could even grow a little bit more, which isn't a bad thing," the trader said.
In addition, the economy received a last-minute reprieve from ostensible financial disaster after Congress approved a spending measure late Wednesday which the president quickly signed. The agreement ended the political standoff between Democrats and Republicans, returned federal employees to their jobs for the first time this month and ensured the federal government would not default on its debt obligations, at least until the early part of next year.
Most of this week's largest deals have already priced. Barclays held preliminary pricing of $188 million of Lower Colorado River Authority revenue refunding bonds. They are rated A1 by Moody's Investors Service and A by both Standard & Poor's and Fitch Ratings.
Yields range from 0.61% with a 4.00% coupon in 2015 to 5.15% with a 5.00% coupon in 2039. The bonds are callable at par in 2023.
By midday, yields had fallen most between 10 and 15 years and past 20 years, according to one market gauge.
Puerto Rico bond bids continue to see a general firming since commonwealth officials told investors Tuesday on a call that bankruptcies of island issuers would be ruled out. Some Puerto Rico bonds are trading stronger Thursday.
Trades on the Municipal Securities Rulemaking Board's EMMA site of Sales Tax Financing Corp., or COFINA, bonds showed lower yields on intraday trading. One customer bought a block size trade of COFINA 5.75s of 2037 bonds at 7.95%, lower than 8.58% on Wednesday.
Tax-exempt yields on the triple-A Municipal Market Data scale crossed into the afternoon as much as four basis points lower beyond five years.
On Wednesday, The 10-year and 30-year yields climbed three basis points each to 2.65% and 4.26%, respectively. The two-year held steady at 0.35% for the fourth straight session.
Yields on the Municipal Market Advisors benchmark scale ended as much as two basis points higher. The 10-year yield increased one basis point to 2.78% and the 30-year yield climbed two basis points to 4.39%.
The two-year was unchanged at 0.55% for the sixth consecutive session.
Treasury yields have pushed lower, outpacing munis, on news that the U.S. government found a temporary solution to the debt ceiling crisis.
The benchmark 10-year yield has fallen seven basis points to 2.60%. The 30-year yield has dropped six basis points to 3.67%. The two-year yield has ticked down one two basis point to 0.33%.
In economic news, this month's Federal Reserve Bank of Philadelphia Report on Business showed that the region's manufacturing sector grew at a slower pace in September. The general business conditions index slid to 19.8 from 22.3 in August. Economists surveyed anticipated an index reading of 15.0.