The tax-exempt market strengthened for the fourth session this week as demand outweighed supply and pushed muni prices higher.

"Munis are on fire," a New York trader said.

Indeed, the municipal market was stronger Thursday morning, according to the Municipal Market Data scale. Yields inside four years were steady while yields between six-years and 14-years fell as much as three basis points. Outside 15 years, yield dropped two to five basis points.

On Wednesday, munis were stronger. The 10-year yield closed at 1.77%, 10 basis points above its record low of 1.67% set Jan. 18. The 30-year yield hit a record low as recorded by MMD by falling to 3.02%. It beat the previous record of 3.04% set on June 1. The two-year was steady at 0.32% for the 28th consecutive session

Treasuries were stronger Thursday morning. The benchmark 10-year yield dropped two basis points to 1.50% while the 30-year yield fell three basis points to 2.58%. The two-year yield fell one basis point to 0.27%.

In the primary market, JPMorgan is expected to price $427.7 million of Tennessee State School Bond Authority higher education facilities second program bonds in three series. The credit is rated Aa1 by Moody's Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings.

Goldman, Sachs & Co. is expected to price for institutions $335.9 million of Austin, Texas, water and wastewater system revenue refunding bonds following a retail order period Wednesday. The credit is rated Aa2 by Moody's, AA by Standard & Poor's, and AA-minus by Fitch.

RBC Capital Markets is expected to price $211.3 million of Oakland, Calif., taxable pension obligation bonds, rated Aa3 by Moody's and A-plus by Standard & Poor's.

In economic news, seasonally adjusted initial jobless claims fell 26,000 to 350,000 for the week ending July 5. It was the lowest since the week of March 8, 2008, when jobless claims totaled 348,000.

Economists predicted 370,000 claims.

"Jobless claims in the first week of July were likely depressed by fewer-than-usual summer shutdowns in the auto industry, which means that the claims data in early July are far less useful than normal in judging the underlying state of the labor market," wrote economists at RDQ Economics. "It will take two or three weeks for this distortion to the claims data to unwind, which means this report will be of little use in forming early opinions on the July employment data. Although the 26,000 decline in claims was larger than we were projecting, it was within the range that we calculated could be the possible effects of the auto shutdowns."

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