NEW YORK — A quiet municipal market started Wednesday’s session a little weaker.
The market had pretty strong opinions a day earlier about the news regarding President Barack Obama’s proposal to cap tax-exempt interest. Their views ranged from moderate concern to confidence that the bill would gain no traction. But traders reported that the topic affected trading in both the primary and secondary markets.
The market opened Wednesday with little activity, but optimistic about the new issuance hitting the primary, a trader in New York said.
“It’s very, very quit right now; we see yields are cheaper by a couple of basis points,” he said. “We just have a little bit of weakness right now. There is some caution out there.”
Tax-exempt yields, after holding steady for three days, appear slightly weaker Wednesday morning, according to the Municipal Market Data scale. There is no reading yet for the front end of the curve. Maturities six years and out are flat to one basis point higher.
Once again, there was nothing new with the benchmark 10-year yield Tuesday. It held at a record low of 2.07%, as measured by MMD.
The 30-year yield remained unchanged at 3.66% for a third session, its lowest level in at least three decades. The two-year yield stayed at 0.30% for a 24th consecutive session, spinning its wheels at its lowest level in more than 40 years.
Treasury yields have started the day’s session mostly weaker. The 10-year benchmark yield has ticked up two basis points to 2.01%, crossing almost a psychological barrier at 2.00%. Though higher, it’s still near a range it hasn’t seen in roughly five decades.
The 30-year yield has risen two basis points to 3.35%. The two-year yield has inched down one basis point to 0.20%.
Volume in the primary is expected to rise from last week’s scant supply. Industry estimates place new issuance for this week at $4.65 billion, not including $5.4 billion of California revenue anticipation notes. Estimates for last week’s volume were revised downward to $1.95 billion.
“The calendar this week may just force some action here,” the trader said. “We need volatility, some type of movement right now.”
In economic news, the Labor Department reported Wednesday that producer prices were flat in August, marked by a decline in energy prices for the third month in a row. Core producer prices, not including food and energy costs, ticked up 0.1%, the smallest increase since May.
Energy goods declined 1.0% for the month. Prices for gasoline, diesel and liquefied petroleum gas all fell by at least 1.0%.
Economists polled by Thomson Reuters predicted that producer prices would fall 0.1% and core prices would rise 0.2%.
Also, the Commerce Department reported Wednesday that retail sales remained unchanged in August. It represented the slowest sales pace since June 2010, when sales saw a 0.2% decline.
Sales excluding motor vehicles and parts rose 0.1% for the month. Economists surveyed by Thomson Reuters predicted increases of 0.2% for both overall and ex-autos.
