NEW YORK — The municipal market continues to limp through poor conditions for trading and new issuance as the day crosses into the afternoon.
Trading volume is still slight and Treasury yields continue to show a weak tone, a trader in Chicago said.
“You’re going into Labor Day weekend; this is historically the slowest of the year,” he said. “And the activity, hurricane or no hurricane, indicates that. The bottom line is there’s no pulse.”
Traders and other market participants on the east coast have started to filter back in at roughly the pace new issuance is reaching the market.
The conditions for new issuance have left the market with an apathetic tone, the trader said. “Because no one wants to do anything,” he added. “But you continually see pressure on spreads [to MMD] to gain more investor interest.”
The Municipal Market Data scale had yet to update tax-exempt yields at press time. Yields were slightly weaker through the middle and back ends of the curve to start the day. They were steady through 2015. Securities maturing beyond 2015 were flat to one basis point higher.
Treasury yields headed into the afternoon higher across the curve. The 10-year benchmark yield, after sliding 11 basis points the final two trading sessions last week, has risen nine basis points to 2.28%.
The 30-year yield, after falling 11 basis points Thursday and Friday, has jumped nine basis points to 3.63%. The two-year yield has ticked up two basis points to 0.22%.
The 10-year muni yield edged up one basis point to 2.26% at Friday’s close. For the week, it rose 11 basis points from its all-time low of 2.15%.
The 30-year muni yield was unchanged at 3.88%. It rose nine basis points on the week. The two-year yield also remained at 0.30% for a 13th straight session, hovering at its lowest yield in more than 40 years.
New issuance, which is historically low on the week preceding Labor Day, is expected to be exceptionally meager. According to industry estimates, municipal bond sales scheduled for this week should total $1.2 billion, compared to a revised $4.4 billion last week.
No deals of any significant size had reached the market at press time.
Economic news on the day has been positive. Leading off, the Commerce Department reported Monday that personal spending rose 0.8% in July.
The number represents the biggest increase since August 2009. Personal income rose 0.3% on a seasonally adjusted basis.
The core PCE deflator rose 0.2%, month-over-month. But a 2.8% rise in energy prices put the overall increase in the PCE deflator at 0.4%.
Economists polled by Thomson Reuters estimated a 0.3% rise in personal income, a 0.5% increase in consumption, and a 0.2% rise in the core PCE deflator.
In addition, the National Association of Realtors reported Monday that pending home sales declined 1.3% to a reading of 89.7 in July from a revised 90.9 in June. Economists polled by Thomson Reuters expected a 1.3% decrease for the index.
The stock market took the economic data and ran with it. The major equities indexes are all up by at least 1.87%, heading into the afternoon. The Dow Jones Industrial Average is up 210 points so far.
