NEW YORK – The tax-exempt market was steady to slightly weaker Friday morning following a weaker session Thursday.

Traders said the tone of munis has shifted from really strong to weaker as the week progressed.

“I would say they are selling a bit,” a New York trader said. “I am getting counters on bids. It’s a smidge lower.”

He added the news coming from JPMorgan is actually helping munis a little. “I think the news might have helped a little, but munis have also been weaker the latter part of this week.”

Munis were mostly steady Friday morning, according to the Municipal Market Data scale. Yields inside eight years were steady while yields outside nine years fell up to one basis point.

On Thursday, the two-year yield closed flat at 0.31% for the 17th consecutive trading session. The 10-year yield rose two basis points to 1.76% while the 30-year yield increased one basis point to 3.09%.

The 10-year yield remains eight basis points above its record low of 1.68% set Jan. 31. The 30-year remains one basis point above the record low of 3.08% set Wednesday.

Treasuries were stronger. The benchmark 10-year yield and the 30-year yield each fell two basis points to 1.87% and 3.04%. The two-year yield fell one basis point to 0.26%.

In economic news, the producer price index fell 0.2% in April following an unchanged index in March while core prices rose 0.2%, after rising 0.3% the month before.

The drop in the index fell short of expectations. Economists had predicted the index would remain unchanged. The core price index came in right at the 0.2% gain economists had expected.

“Just as we saw in yesterday’s import price data for April, this report shows more inflation relief on lower energy prices,” wrote economists at RDQ Economics. “However, there is little evidence here that this relief is feeding through into core inflation in any significant way and we expect that the dip in headline inflation will prove to be temporary given the Fed’s monetary policy stance. We expect the good news on inflation to carry through to the CPI and PCE price measures in April and view this as a factor that will bolster real household income growth in the near term.”


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