Yields on municipal bonds showed signs of recovering from a slow week Friday, but continued to underperform Treasuries through the afternoon.
"During this week you had a reasonable amount of volatility in Treasuries, you had auctions, an emerging market dilemma in the background," one trader in New York said in an interview. "The market has pushed enough this month to where yields now are at the point where customers are stepping back and being patient."
Bonds maturing beyond 2020 may have lost a basis point, according to Municipal Market Advisors, while yields on 10-year and 30-year Treasury fell three basis points each.
"The market felt pretty weak yesterday and all of a sudden Treasuries went down," the trader said. "I think this morning's move maybe caught some people offside. With our market not trading, we just kind of sit here and underperform from Treasuries."
Treasuries yields dropped Friday morning, with the 10-year yield down to 2.67% and the 30-year yield at 3.61%. The 2-year yield also slid three basis points to 0.34%.
"There hasn't been a lot of new issue supply to focus on amid the volatility in the market," the trader said. "There were some trades today but it's been quiet in general."
Total sales this week reached $4.98 million, according to data from Thomson Reuters. Potential volume next week could reach $4.47 million, according to Ipreo and The Bond Buyer.
