NEW YORK – Despite a drop in unemployment, stocks were down while munis and Treasuries were firming in Friday morning trading as optimism was short-lived.
However, tax-exempt traders said the muni rally this week may not be sustainable.
“It’s quieter today though,” said a trader in New York. “People are tired. Even though it is short, it felt like a long week.”
He added munis have “come so far, so quick” that it is “natural to have a breather.”
Munis were firming in Friday morning trading, according to the Municipal Market Data scale. Yields inside the nine-year were flat while yields on the 10-year and 11-year fell one basis point. The 12-year yield fell between one and three basis points while the 13-year to 19-year yields dropped between two and four basis points. Yields on the 20-year to 23-year maturities fell between one and three basis points. Credits outside 24-year were steady.
On Thursday, the two-year yield closed flat at 0.42% for its third consecutive trading session. The 10-year yield closed down one basis point to 1.87% and the 30-year fell three basis points to 3.54%.
Treasuries were firming. The benchmark 10-year yield and the 30-year yield fell three basis points each to 1.97% and 3.03%, respectively. The two-year yield was steady at 0.27%.
In economic news, non-farm payroll employment rose by 200,000 in December, helping push the unemployment rate down to 8.5%.
The increase in payroll employment was much higher than expected. Economists had predicted a 150,000 increase. The 8.5% unemployment rate in December was down from 8.7% in November.
“A decent jobs report that points to solid readings for personal income growth and industrial production for December and further adds to the picture that the economy was gaining momentum as 2011 drew to a close,” wrote economists at RDQ Economics. “We think these trends augur well for 2012 and we look for job creation of around 200,000 per month through the year.”
They added: “We do expect some recovery in labor force participation and we expect that the unemployment rate for the fourth quarter of 2012 will still be above 8%.”
