NEW YORK — A weaker-than-expected employment report has jump-started a rally in municipal and Treasury bond yields from the middle of the curve on out at a time when most of the financial world just wants to slip quietly into the Labor Day weekend.
Tax-exempt yields are primed to rally Friday, falling across all but the front end of the curve to start the day, according to the Municipal Market Data scale. For maturities between 2016 and 2018, yields are flat to four basis points lower. Those for maturities beyond 2018 are four to six basis points lower.
The benchmark 10-year yield on Thursday ticked down one basis point to 2.24% to end the day. The 30-year yield also dipped a basis point to 3.88%.
The two-year yield remained unchanged at 0.30% for a 17th straight session, hovering at its lowest level in more than 40 years.
Treasury yields, after rallying most of Thursday, continued to fall across the middle and back end of the curve Friday. The 10-year benchmark yield has fallen eight basis points to 2.06%.
The 30-year yield has dropped nine basis points to 3.41%. The two-year yield has actually inched up one basis point to 0.20%.
New issuance volume scheduled is expected to rise during the holiday week. Industry estimates place the total for next week at $2.99 billion, versus a pathetic $1.72 billion that came to market this week.
Investors pulled their money from municipal bond mutual funds for a sixth consecutive week. The week ending Aug. 31 saw $282 million in outflows from muni bond funds that report their flows weekly, according to Lipper FMI.
The withdrawals have increased from those of the previous week, when there were net outflows for muni bond funds of $148 million.
High-yield muni funds also saw their sixth straight week of outflows. Funds that report weekly saw outflows of $108 million, Lipper reported, against reported outflows of $35 million the previous week.
In economic news, the Labor Department reported Friday that U.S. employers added no jobs in August, shocking market expectations and leaving the unemployment rate unchanged at 9.1%.
What’s more, numbers for July and June were revised downward by 58,000 jobs, showing a weaker labor market than economists perceived up to now. Total private payrolls were up 17,000, the smallest increase in 18 months.
Economists polled by Thomson Reuters predicted 75,000 total new jobs and an increase in private payrolls of 105,000. They forecasted an unemployment rate of 9.1%.
The equities markets, accordingly, have taken it on the chin. The major indexes are all down to start the day by at least 1.86% from Thursday’s close. The Dow Jones Industrial Average is down almost 224 points.
