The municipal market faces another day of modest trading and trace elements of issuance reaching the primary.

In the secondary, though, there is activity in the intermediate part of the yield curve, a trader in New York said.

Foremost on the minds of market participants, as has been the case for most of the quarter, sits the fiscal cliff and the effect negotiations toward its resolution will have on munis' tax-exempt status. The uncertainty has prompted both action and inaction from different market participants leading up to the holiday season.

This week, though, activity is sparse.

"With no supply this week, and Treasuries firm for pretty much the past two days, you're seeing spotty strength mainly in the belly," the trader said. "But outside of that, really, guys are trying to position for year end. There seems to be guys just filing stuff in a drawer until next year."

The Christmas and New Year's holidays drastically shave the volume scheduled to reach the primary market this week. The market should see about $2 million total, all on the competitive side of the market.

The numbers are a decided downward shift from last week's revised $3.14 billion. Last week there was a revised $879 million in competitive offerings, coupled with a revised $2.26 billion in negotiated deals.

In the secondary, there have been a couple of small customer bid lists, the trader said. But there is nothing at the bid more than 5 million bonds.

"If you check the MBIX or one of the indexes that tracks bid-wanteds, Christmas Eve was obviously very, very low, but yesterday was three million bonds," the trader said. "Last Thursday and Friday were upwards of one billion or 900 million."

Tax-exempt yields are steady through six years and beyond 13 years, according to one market read. Between seven and 13 years they are flat to two basis points lower.

The Municipal Market Data triple-A yield curve ended Wednesday's session steady following flat trading on Monday. The benchmark 10-year triple-A yield close flat at 1.77% for the third consecutive trading session.

The 30-year yield also closed flat at 2.83% for the third session. The two-year finished flat at 0.31% for the sixth consecutive trading session.

Treasury yields fell Wednesday. The benchmark 10-year yield dropped two basis points to 1.75%. The 30-year yield dipped one basis point to 2.93%. The two-year was unchanged at 0.27%.

In economic news, the Labor Department said Thursday that initial jobless claims fell 12,000 to 350,000 in the week ended Dec. 22. This compared with claims of 362,000 for the week ended Dec. 15, revised upward from the initially reported number of 361,000.

There were 3.206 million continuing jobless claims the week ended Dec. 15. This represented a 32,000 decrease from the week before, when the number was revised upward to 3.238 million, and had first been reported as 3.225 million.

Economists Thomson Reuters surveyed anticipated 360,000 initial and 3.200 million continuing claims.

In addition, the Commerce Department reported Thursday that sales of new single-family houses increased 4.4% to a seasonally adjusted annual rate of 377,000 in November. The accelerated sales pace fell on the heels of a revised October rate of 361,000, which had originally been reported as 368,000.

The November rate almost reached the 378,000 pace that economists surveyed by Thomson Reuters had predicted. And it stood 15.3% above the November 2011 estimate of 327,000.

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