The municipal bond market underperformed Treasuries Friday afternoon as yields didn't fall as much as their taxable counterparts on a risk-off trade.
"It looks like munis are underperforming on light activity on a quiet Friday," a Virginia trader said, adding that munis could play catch up Monday and Tuesday. "Supply next week looks like things should stack up favorably for munis. If you take out the big Iowa Finance Authority fertilizer deal, it's very manageable supply and is constructive for the market."
Municipal bond scales ended steady to one basis point stronger Wednesday after posting small losses earlier in the week.
Yields on the Municipal Market Data 5% triple-A GO scale ended as much as one basis point stronger. The 10-year was steady at 1.70% for the seventh session and the 30-year closed unchanged at 2.90% for the fifth trading session. The two-year closed steady at 0.29% for the 15th session.
Yields on the Municipal Market Advisors 5% scale also ended flat to one basis point stronger. The 10-year yield finished flat at 1.77% for the second session and the 30-year closed unchanged at 3.02% for the sixth session. The two-year was flat at 0.32% for the 15th session.
Treasuries continued to rally Friday afternoon. The 10-year and 30-year yields slid five basis points each to 1.67% and 2.86%, respectively. The two-year yield fell one basis point to 0.23%.