NEW YORK – The tax-exempt market appeared to be taking a pause Thursday after strengthening for four consecutive sessions as positive economic news took the stage.
“Munis are kind of quiet again,” a New York trader said. “It looks like a little pause.”
Munis were steady to firmer Thursday morning, according to the Municipal Market Data scale. Yields inside three years were steady while the four-year yield fell one basis point. Yields on five- to nine-years were steady while yields outside 10 years fell up to two basis points.
On Wednesday, the two-year yield held steady at 0.29%, the record low set last Tuesday. The 10-year yield also closed unchanged at 1.83% for its fourth consecutive trading session. The 30-year yield fell three basis points to 3.21%.
Treasuries were weaker on positive economic news. The two-year yield and the 30-year yield rose one basis point each to 0.29% and 3.10%, respectively. The benchmark 10-year yield rose two basis points to 1.95%.
In the primary market, JPMorgan is expected to price $440.8 million of Dallas-Fort Worth International Airport Board join revenue refunding bonds, rated A1 by Moody’s Investors Service, and A-plus by Standard & Poor’s and Fitch Ratings.
BOSC, Inc. is expected to price $158.5 million of Lake Travis, Texas, Independent School District unlimited tax school building bonds, rated AA-plus by Standard & Poor’s and Fitch.
In the competitive market, triple-A rated Virginia is expected to auction $96.8 million of general obligation bonds.
In economic news, housing starts jumped 1.5% to a seasonally adjusted annual rate of 699,000 in January from 689,000 in December, the Commerce Department said. Building permits rose 0.7% in January to 676,000 from 671,000 in December.
Housing starts beat the estimate of 675,000 expected by economists. Building permits came in below the 680,000 expected.
“The rising homebuilder confidence and the gains in housing starts and building permits are encouraging signs that housing construction could add to growth of output and employment in 2012,” wrote economists at RDQ Economics.
In other economic news, seasonally adjusted initial jobless claims fell 13,000 to 348,000 for the week ending Feb. 11, down from the previous week’s 361,000. Initial claims were the lowest since March 8, 2008, when they were 347,000. Continuing claims fell 100,000 to 3.426 million for the week ending Feb. 4 and were the lowest since August 23, 2008, when claims numbered 3.395 million.
The initial claims were lower than the median 365,000 expected by economists. Continuing claims also came in lower than the 3.500 million that economists had estimated.
“The decline in initial claims breaks a pattern of increases in the second week of February in recent years and is a result of the unadjusted level of claims falling more rapidly that the seasonal adjustment factors assumed,” economists at RDQ wrote. “We had pointed out that the seasonal adjustment factor was less of a hurdle this year and this is undoubtedly a factor in the decline. At this point we would look for private payroll growth to exceed 200,000 in the month.”
In further economic news, the producer price index rose 0.1% in January after a 0.1% decrease in December. The core rate jumped 0.4% following a 0.3% jump in December, the Labor Department said.
The increase was less than the expected 0.4% gain predicted by economists but the core price index came in higher than the 0.2% gain economists had estimated.
“Wholesale inflation has not responded to economic slack as the Fed’s inflation models would have predicted and there is clearly no evidence of deflationary pressures,” wrote RDQ economists. “The favorable readings on headline wholesale price inflation have much to do with the mild winter and the lower-than-usual demand for heating. However, this could prove to be a significant stimulus to the consumer early in 2012.”
In more economic news, the Philadelphia Fed index rose to 10.2 in February from 7.3 in January. The jump was higher than the estimated increased to 9.5 expected by economists.