NEW YORK – With muni yields hitting new record lows almost daily, there is some skepticism in the market about how long the rally can last.
“There is disbelief in the continued Municipal Market Data bumps, but here they come again,” said a trader in Los Angeles. “We are waiting for the calendar to ramp up and see how real this is and if the market will hold. If supply jumps, we’ll see if it can hold.”
He added overall for the week, there was a “strong tone for people who want to sell. Prices keep going up. It’s all the same types of things we’ve been seeing. There is not enough supply in the market and there are more people who want to buy than there are sellers.”
In Friday early afternoon trading, munis were continuing to rally, according to the Municipal Market Data scale. The five-year to seven-year yields fell two basis points while the eight-year and nine-year yields dropped between one and three basis points. The ten-year yield fell between two and four basis points. Yields on the 11-year to 13-year dropped between three and five basis points while the 14-year yield fell between four and six basis points. Outside the 15-year, yields plummeted between five and nine basis points.
On Thursday, the two-year closed down two basis points at 0.35%. The 10-year fell three basis points to close at 1.76%, beating the previous record of 1.79% as recorded by Municipal Market Data Wednesday. The 30-year dropped four basis points to 3.29%, beating the previous record of 3.33% as recorded by MMD on Wednesday.
Treasuries continued to rally with yields reaching lows not seen yet in 2012. By Friday afternoon, the benchmark 10-year yield and 30-year yield fell nine basis points each to 1.84% and 2.88%, respectively. The two-year yield fell one basis point to 0.23%.
From the market close last Friday to market close Thursday, the two-year yield has fallen seven basis points, the 10-year yield has dropped nine basis points, and the 30-year yield has plummeted 21 basis points.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed even more astonishing numbers.
Bonds from an interdealer trade of Oklahoma Transportation Authority 5s 2026 yielded 2.55%, 49 basis points lower than where they traded last Friday.
Bonds from an interdealer trade of New York Liberty Development Corp 5s of 2041 yielded 3.75%, 34 basis points lower than where they traded last Friday.
Bonds from another interdealer trade of California 4.75s of 2027 yielded 3.26%, 23 basis points lower than where they traded the previous Friday.
A dealer sold to a customer Washington 5s of 2041 at 3.47%, 39 basis points lower than where they traded last Friday.
Looking to new issuance next week, the tax-exempt market can expect $3.45 billion, down from this week’s $4.19 billion. In the negotiated market, about $2.42 billion is expected to be issued, up from this week’s revised $2.03 billion. On the competitive calendar, $1.03 billion is expected to come to market, down from this week’s revised $2.16 billion.
