Municipal bonds opened Friday with steady yields as many traders were absent ahead of a three-day holiday weekend.
"It's really quiet," one trader from the west coast said in an interview. "I think New York's getting a little bit of a reprieve from the storm so people are getting out of town. The market is just shutting down."
With no sizeable deals scheduled for Friday, the market continued to wallow in doldrums spurred on by dismal issuance the past two weeks. New supply in the market totaled just $3.44 million this past week, with just $2.28 expected next week.
The market is closed Monday for Presidents' Day.
"There's no impetus for people to sell," the California-based trader said. "Treasuries are down, there's no supply, things are really starting to get stagnant. We really need supply to bring transparency to the market."
Without significant supply on the calendar, traders have little encouragement to sell bonds. Normally, an investor will sell bonds to pay for new ones, but without incoming supply, those bonds are better held onto, as buyers compete for bonds in the secondary market.
"You want to keep your inventory moving so you'd normally sell the bonds you're holding," the trader said. "The impact of low supply is twofold: there are no new bonds coming to you, so you don't need to get rid of your old stuff, but also you're the only game in town. You'll see what you can get for the bonds you have."
Municipal bond yields were steady Friday morning, according to Municipal Market Data's AAA scale.
Treasuries yields were mostly unchanged, with the 30-year moving one basis point higher to 3.70% and the 10-year remaining at 2.75%. The two-year yield was unchanged at 0.33%.
