NEW YORK – After gobbling up the new deals spawned during one of the year’s largest weeks of new issuance, the tax-exempt market is spending Friday digesting.
“It’s pretty quiet today and the market is taking a feel for the week from all the new deals,” said a trader in New York. “There is not much going on by way of directional trading so the secondary seems pretty quiet. Overall, the market is steady this morning.”
And indeed, muni yields were mostly steady across the board Friday morning. Yields on credits maturing between 2018 and 2035 rose up to one basis point.
Thursday, the 10-year tax-exempt yield closed at 2.30% and the 30-year yield closed at 3.71%. The two-year yield closed at 0.42% for its third consecutive session.
Treasuries were flat in Friday morning trading. The two- and 10-year opened steady at 0.24% and 2.07%, respectively. The 30-year yield was up one basis point to 3.13%.
Muni-to-Treasury ratios were mixed this week. The 10- and 30-year munis outperformed relative to the five-year. The five-year ratio increased all week, from 126% on Monday, to 132.2% on Tuesday, to 133.7% on Wednesday. The ratio declined slightly Thursday to 130.8%.
The 10- and 30-year spots aren’t as attractive as those ratios declined this week. After peaking at 115.2% on Tuesday, the 10-year muni-to-Treasury ratio decreased to 114% on Wednesday and 111.7% on Thursday. Similarly, the 30-year muni-to-Treasury ratio peaked on Tuesday at 122.1%, and then declined to 120.4% on Wednesday and 119.3% on Thursday.
In economic news, the economy generated 80,000 new jobs, slightly below expectations. But August and September had upward revisions of 102,000.
While job gains were widespread in the private sector, governments cut 24,000 positions.
“Given the high state of nervousness about the global economy and Europe’s situation, it’s encouraging to see American businesses still expanding their payrolls,” said Sal Guatieri, senior economist at BMO Capital Markets. “While job growth needs to step up to foster a sustained decline in the unemployment rate, the October report suggests the economy is still moving forward rather than backward.”
