NEW YORK – The tax-exempt market took a breather Friday morning as traders recovered from a mixed week that started out weaker and ended slightly stronger.
“It’s very slow here,” a New York trader said. “The market feels quiet and flat. There is a very, very small bump if anything at all.”
The Municipal Market Data scale was not updated by press time. But on Thursday, the two-year muni yield closed steady at 0.35% for its 10th consecutive trading session. The 10-year and 30-year muni yields fell three basis points each to 1.79% and 3.27%.
Treasuries were mostly flat across the curve. The two-year and 30-year yields were steady at 0.22% and 3.10%. The benchmark 10-year yield fell one basis point to 1.93%.
Muni-to-Treasury ratios on the short end of the curve jumped this week as munis underperformed Treasuries. The five-year ratio catapulted to 100% on Thursday from 91.2% on Monday. The 10-year jumped to 91.5% from 90.8%. The 30-year muni-to-Treasury ratio fell slightly to 105.8% on Thursday from 107.3% on Monday.
In economic news, advance real gross domestic product grew 2.8% at an annual rate in the fourth quarter, the Commerce Department said. The figure came in below the 3% estimated by economists.
“The increase in real GDP was close to expectations but hides what lies beneath the number,” wrote economists at RDQ Economics. “With nominal retail sales up 7.9% at an annual rate in the fourth quarter, we are not buying that nominal spending growth was as weak as suggested by this report and we continue to argue that initial readings on GDP can provide a very misleading representation of trends in the economy. That said, we continue to look for 3% economic growth in 2012.”