The secondary took the reins of the municipal market Thursday morning and has steered it to weaker territory.
Rising Treasury yields are pulling their muni brethren higher at the intermediate and long end of the curve, traders say. As most of the week's tax-exempt issues have already been priced, and the scales are already known, investors are trying to get other deals done away from the primary market at this point, a trader in New York said.
"It seems weaker here today," he said. "I'm trying to figure out if it's just following in sync with Treasuries being off. There does seem to be a large seller of pretty high-grade paper in the 10-year sector right now; that might move things a little bit further."
Traders say yields look a little buoyant on the morning. One market gauge has triple-A yields up to three basis points higher on the curve beyond two years.
The primary market expects supply to total $7.64 billion this week. That compares with a revised $7.44 billion last week.
The number approximates the amount the market has been seeing lately. With most of the week's tax-exempt supply already arrived, industry watchers say the market has been absorbing the volume with little difficulty.
The benchmark 10-year muni yield closed Wednesday's session at 1.72%, according to Municipal Market Data. The two-year remained at 0.30% for the 21st consecutive trading session. The 30-year yield slipped one basis point to 2.83%.
Treasuries yields have backed up to start Thursday. The benchmark 10-year yield has jumped seven basis points to 1.84%.
The 30-year yield has vaulted six basis points to 2.99%. The two-year yield has ticked up two basis points to at 0.32%.
In economic news, the Commerce Department reported Thursday that new orders for manufactured durable goods increased $19.6 billion, or 9.9%, to $218.2 billion in September.
The rise in new orders represents the largest month-over-month increase since a 13.9% jump in January 2010. It followed a steep decline in August of 13.1%, which was originally reported as a 13.2% fall.
New orders climbed 2%, excluding transportation, and leapt 9.1%, excluding defense. But those excluding aircraft remained unchanged from the previous month.
Economists polled by Thomson Reuters estimated a 6.9% increase in durable goods orders.
In addition, the Labor Department reported Thursday that initial claims for U.S. state unemployment benefits declined by 23,000, to 369,000, in the October 20 week.
Economists projected a median estimate of 369,000, or 19,000 fewer than the 388,000 level reported the week of October 13. That week's claims level was revised upward by 4,000 to 392,000.