NEW YORK — The municipal market has mostly been following Treasuries so far Thursday morning. But the primary and secondary markets are also providing leadership.
The 10-year range, in particular, seems to have become a threshold of sorts for munis over the past trading session.
Inside of that range, especially eight years on in, traders are seeing strong demand for new issuance. Outside of that, investors are looking for concessions in yield.
This is likely to continue with the limited new deals that come to market Thursday, a trader in New York said.
“It’s still high-grade names, from what I’ve seen, focusing on 10 years in the bid-wanteds,” he said. “It’s seeing if those crossover buyers have interest in these levels, versus Treasuries, as well as people realizing that things may sell off a little bit here.”
The secondary market is also seeing decent activity, with some high-grade names getting attention, the trader said.
“The secondary is moving,” he said. “There are quite a lot of bid-wanted lists out there this morning. There’s a decent size bid-wanted that came out of a large customer this morning; we’re still waiting for results off of that list.”
Tax-exempt yields were steady across the curve Thursday, following a day of noticeable softening, according to the Municipal Market Data scale.
Treasury yields started the day stronger. The 10-year benchmark yield, after leaping 15 basis points Wednesday, has fallen five basis points to 2.25%.
The 30-year yield, after spiraling upward 17 basis points Wednesday, has slipped three basis points to 3.62%. The two-year yield has dropped two basis points to 0.22%.
The 10-year muni yield rose six basis points Wednesday to 2.25%, and 10 basis points in two days, after sitting at its all-time low for the previous three sessions.
The 30-year muni yield also vaulted six basis points to 3.88%. The two-year yield held at 0.30% for an 11th straight session, its lowest yield in more than 40 years.
New issuance, although sparse for the week, met a healthy appetite Wednesday, even through concession in yield. The industry predicts municipal bond sales of $3.65 billion against a revised $4.72 billion last week.
Economic news continues to disappoint, but not necessarily surprise. The Labor Department reported Thursday that initial jobless claims increased 5,000 to 417,000 for the week ending Aug. 20. The numbers rose in part as a result of workers at Verizon Communications filing claims during a two-week labor dispute.
Continuing claims fell to 3.641 million for the week ending Aug. 13.
Economists polled by Thomson Reuters predicted 405,000 initial claims and 3.700 million continuing claims.
