Investors were unfazed by signs of a rebounding economy as muni bonds began to stabilize Wednesday.
The durable goods report, issued by the Department of Commerce, revealed economic strengthening with a 2.2% surge in durable goods orders in February, beating estimates of a 1.0% increase by economists polled by Thomson Reuters.
"There's been some positive economic numbers out, but to the extent that these economic numbers are what's driving the market, that's not our view," a Chicago based trader said.
After the report was released, munis gained. Yields for bonds maturing from five to 20-years declined as much as three basis points, while maturities of four years or less held steady, according to MMD data.
Investors believe that supply-demand patterns and fund flows are affecting the market more than the recent economic reports. There has been low issuance this year with $33.66 billion in bond sales for January and February 2014 compared with $51.68 billion for the same two months in 2013, according to data compiled by The Bond Buyer.
There have also been six straight weeks of positive flows into municipal mutual funds as of the week ended March 19. Inflows totaled $107.3 million for that week, and $223.8 million for the week ended March 12, according to Lipper FMI.
"The technical side of things is driving the muni market, technical meaning supply and demand and fund flows," the Chicago trader said. "It's been a pretty light supply week and it's been six or seven weeks of positive fund flows."
The Oklahoma Capitol Improvement Authority State Facilities $221.2 million of revenue refunding bonds hit the market with yields ranging from 0.28% with a 2% coupon in 2015, to 3.55% with a 5% coupon in 2030. There is an optional call in 2024, and Citigroup Global was the lead underwriter. The bonds were rated AA by both Standard & Poor's and Fitch Ratings.
Treasury yields were fairly steady on the day, holding at 0.46% for the two-year note and 2.73% for the 10-year, and rising one basis point to 3.58% on the 30-year.
