Municipals started softer Wednesday morning after economic data from ADP showed more job growth than expected.
ADP, which processes company payrolls, reported private payroll growth of 215,000 in November, larger than the 185,000 consensus by Econoday. The better-than-expected numbers may have added to the growing concern among municipal investors that the U.S. government will begin to slow down its quantitative easing, traders said.
"With ADP data this morning showing a little stronger job growth, you worry that too strong of a jobs number will mean the fed eases up on their monthly buying," a New York-based trader said of the Federal Reserve's bond-buying program.
Volume this week is expected to be larger than the week of Thanksgiving, with potential volume totaling $6.55 billion, up from sales of $652.2 million last week, according to Ipreo, The Bond Buyer and Thomson Reuters numbers.
Traders anticipated that the issuance of $1.2 billion of New York Tobacco Settlement Financing Corporation bonds, which Citi is set to price Wednesday, would be well-received by buyers.
"Traders are looking to the new issue calendar, with lots waiting for the tobacco deal," a trader in New York said. "It looks interesting, with good rates, kickers and short calls."
Yields on the Municipal Market Data triple-A scale were higher Wednesday morning. Bonds maturing between 2017 and 2019 saw yields rise as much as three basis points, while yields on bonds with maturities beyond 2020 were up 3 to 5 basis points. Yields on bonds maturing from 2014 to 2016 were steady.