The municipal bond market followed Treasuries' lead, firming as a weak employment report caused a surge in demand for safe-haven assets.
The March employment report showed a less than robust economy, with only 88,000 jobs added. The unemployment rate fell to 7.6% from reduced labor force participation.
"Although the headline gain in employment was disappointing there is far more going on within the report," wrote economists at RDQ Economics. "First, the pattern of upward revisions continues and, therefore, it is quite possible that the March employment gain is revised significantly higher over the next two months. This report reduces the chances the Fed will taper purchases at the June FOMC meeting, but it does not take it off the table."
Following the news, Treasuries rallied. The benchmark 10-year yield plunged seven basis points to 1.69% and the 30-year yield plummeted 14 basis points to 2.85%. The two-year was steady at 0.23%.
Munis followed Treasuries higher. "Buyers bought everything this morning," a New York trader said. "It was a crazy morning."
Municipal bond scales ended as much as six basis points firmer Thursday after posting gains Wednesday.
Yields on the Municipal Market Data triple-A GO scale ended as much as six basis points lower. The 10-year yield plummeted six basis points to 1.80% while the 30-year yield fell four basis points to 3.03%. The two-year finished flat at 0.31% for the 32nd consecutive session.
Yields on the Municipal Market Advisors 5% coupon triple-A benchmark scale ended as much as four basis points lower. The 10-year yield dropped four basis points to 1.88% and the 30-year yield fell three basis points to 3.14%. The two-year held at 0.33% for the 27th session.
In other economic news, the U.S. international trade deficit was $43 billion in February, a 3.4% decline from the revised $44.5 billion deficit in January. The deficit was near the median $44.6 billion expected by economists.
"A small rise in real exports in February and a small decline in imports on the same basis puts our tracking of the trade 'drag' on first quarter growth only around 0.2% points," RDQ economists wrote. "Given the strength in consumer spending in real terms in the first quarter thus far, we think first-quarter real GDP growth will be reported in the neighborhood of 3.5%. Export growth is picking up modestly but Europe continues to weaken as exports to the European Union dropped by 10.9% on a year-over-year basis. The fastest growing export markets for the U.S. appear to be Latin America, OPEC, and China."