There was little trading activity to speak of midday Monday as municipals underperformed Treasuries and traders bemoaned the light volume ahead of a few larger deals later in the week.
"The tone is positive, but munis are underperforming strong Treasuries," said a Pennsylvania trader.
At midday, yields were mostly steady along the curve with spots of weakness between five and 11 years, according to Municipal Market Data.
Bonds maturing between 2015 and 2018 and from 2026 to 2044 were steady, while yields on maturities from 2019 to 2025 were unchanged or up by two basis points, MMD reported.
"Municipals are a couple of basis points better in spots, but the story of the day is the limited activity," he continued. "Everything selling is the same thing selling every day, just less volume."
"The light calendar is not really helping, it's really adding to the limited activity we are seeing," he added.
The Treasury market, meanwhile, drew strength from news that the Institute for Supply Management manufacturing index fell to 51.3% in January from 56.5% in December -- its slowest rate of growth in eight months.
Gains led the benchmark, 30-year Treasury yield to 3.56% at midday after opening at 3.582%, while the 10-year benchmark yield hovered at 2.60%, down from 2.626% at the open. The two-year, meanwhile, was quoted at 0.30%, after opening at a 0.31%.
"Part of that is the other side of the same coin," the Pennsylvania trader continued. "The weaker numbers are hurting equities, but helping bonds - although munis are not benefitting much right now," he said.
A New York trader agreed the market was extremely quiet at midday as MMD bumped the benchmark triple-A scale by one or two basis points in spots.
"You have a 10-year Treasury creeping around a 2.60%, and no real supply, and otherwise it's very quiet," he said.
Despite news Friday that Puerto Rico's financial health could improve under a plan by Gov. Alejandro Garcia Padilla to balance the 2015 fiscal budget, the New York trader said secondary trading of the commonwealth's debt was unaffected by the news.
"Puerto Rico is pretty much the same," he said.
"It's funny, it's almost like after the Super Bowl, the Street seems like it might be hung over," he said.
