Municipal bond yields across the curve are holding their levels in light retail activity as Thursday's session crossed into the afternoon.
Tax-exempt yields aren't yet responding to Treasuries, which have strengthened as the stock market has seen selling pressure. Traders are mixed on their reads for muni yields.
"It's definitely a little firmer today, maybe a basis point or two, maybe 10 years and in," a trader in Illinois said.
Trading is sparse, he added, with little input from institutions and retail investors dabbling in a variety of paper.
"Prices aren't moving that much," a trader in Texas countered. "You'd expect to see some sort of January effect on prices. But there's paper moving, but it's not in the kind of big quantities that it would take to move the MMD scale. I'm seeing mostly mom-and pop-stuff, not enough to move prices."
The long end of the muni yield is holding up pretty well, the trader in Texas said. It's gotten cheap enough, relative to prices for Treasuries, that there's probably some room for the ratios to improve, he said.
No muni bond issuance is expected this week. In fact, few muni participants have returned to their desks following the New Year's holiday, as they're more content to sit out the rest of the week.
On the year, long-term muni issuance fell 13% in 2013, Thomson Reuters numbers showed. For last year, $329.8 billion reached the market in 11,267 deals, against $379.6 in 13,115 issues in 2012.
With the exception of 2011, when the muni market saw $286.6 billion in long-term volume, 2013 marked the lowest amount of issuance since 2001, when municipalities floated $287.7 billion in issuance.
For the month of December, though, long-term issuance fell just 6%, to $25.2 billion in 757 deals, compared with $26.8 billion in 997 issues in the same period in 2012.
Muni watchers expect demand to remain weak. Muni bond mutual funds recorded a 31st straight week of outflows for the week of Dec. 25, according to Lipper FMI numbers.
Weekly reporting funds recorded outflows of $1.49 billion, with long-term muni bond funds providing the lion's share of the losses, at $1.15 billion.
Muni pros continue to watch bond fund flows carefully, the trader in Texas said, waiting for a reverse in course. Most likely, he added, fund flows will continue to leave bond funds for those of stocks, generally, for much of 2014.
"We'll have that headwind," he said. "But I don't think it'll be a big rout. It's going to be slowly creeping yields. But that's OK: a little higher yields brings buyers back in."
Yields on the Municipal Market Data triple-A scale weren't updated from the morning's read, when they appeared stronger by up to two basis points in the first eight years of the curve and steady beyond that point.
The triple-A, tax-exempt 10-year closed Tuesday's session steady at 2.77%. The 30-year held at 4.19%. The two-year yield was unchanged at 0.33% for a 32nd straight session.
Yields on the Municipal Market Advisors benchmark triple-A scale on Tuesday also remained unchanged across the curve. The 10-year triple-A yield held at 2.79%, the 30-year at 4.41% and the two-year at 0.36%.
Treasury yields have strengthened across most of the curve. The 10-year yield has fallen three basis points to 2.99%. The 30-year yield has also declined three basis points to 3.93%. The two-year has leveled off at 0.39%.
Treasuries are responding to a hiccup in the equities markets. The Dow Jones Industrial Average has fallen roughly 121 points to 16,455.98, while the S&P 500 has dropped about 15 points to 1,833.12.
In economic news, the Institute for Supply Management reported Thursday that the overall economy expanded for the 55th straight time, while the manufacturing sector increased for the seventh consecutive month.
The ISM index dipped to 57.0 last month from 57.3 in November, according to the ISM's monthly report on business. Those economists Thomson Reuters surveyed anticipated the index would fall to 57.0.
