Municipal bond yields plunged Friday morning after a U.S. jobs report showed the economy may not be improving as quickly as expected.
Yields on the Municipal Market Data triple-A scale Friday firmed on bonds maturing after 2016, with those on the long end shrinking the most. Bonds maturing from 2027 to 2044 had yields fall as much as eight basis points, while those with maturities sooner than 2023 slid as much as five basis points.
"Munis had a pretty good week to begin with, and now they've caught even more fire with yields coming down after the jobs report," one New York-based trader said in an interview. "The jobs report doesn't bode well for tapering but it's back and forth debate on that."
The smaller-than-expected rise in December payrolls, a jump of just 74,000 jobs, was likely impacted by seasonality conditions and extreme weather that came with what meteorologists described as a "polar vortex" of cold temperatures. By comparison, the payroll number increased by 241,000 in November.
"The jobs number is a little more confusing than everyone was anticipating," a California-based trader said. "People are still trying to digest how much the weather is affecting things. It's never been quite as big of a factor when you look at storms historically."
Traders iterated that a lack of supply was holding the market back from real strength, as this past week offered just $1.79 billion in new deals. The prior week had just $10.8 million in new issues.
Treasuries strengthened as well Friday morning, with the 10-year yield plummeting by nine basis points. The 30-year yield firmed by five basis points to 3.82%, while two-year yield fell four basis point to 0.39%.
