NEW YORK – With the equity market pausing to catch its breath after a stellar rally Thursday, fixed income is back in vogue: the Treasury market has firmed across the curve and munis are slightly more attractive on a relative basis.
“Certainty the market seems better,” said a muni trader in Chicago. “There are bids as guys test the waters and offerings are becoming a little bit tighter.”
Municipal Market Data’s triple-A curve is steady in early trading, but the trader said there’s some question of whether the curve was raised enough yesterday in the sell-off.
“There’s really just not much to trade out there,” the trader said, expressing the difficulty of a third-party giving an “accurate” read. “It doesn’t take many trades to move things when there isn’t much out there.”
The long-end is where Treasury trading is most active. The 30-year yield has been pushed down eight basis points in early trading to 3.36% and the 10-year yield has dropped seven basis points to 2.31%.
At the short-end, two year Treasury yields are two basis points firmer at 0.30%.
The trader said muni-Treasury ratios remain attractive, but munis have outperformed in the rising yield environment of recent weeks, causing ratios to drop.
At Thursday’s close, the 10-year ratio was 102.9% and the 30-year ratio was 110.5%. At the start of the month, the respective figures were 125.6% and 128.6%.
The two-year muni yield finished one basis point higher at 0.46% on Thursday, after holding steady at 0.45% for 10 consecutive sessions. The 10-year muni yield climbed seven basis points to 2.46% and the 30-year muni yield finished eight basis points higher at 3.80%.
In fresh economic data, personal income rose 0.1% in September and consumer spending rose 0.6%, according to the Bureau of Economic Analysis.
“Consumer spending finished the third quarter with fairly solid momentum, which bodes well for the fourth quarter even if real PCE growth is on only a modest trajectory,” commented RDQ Economics.
