NEW YORK – The weekend has set in early as traders recuperate from the year’s largest week of new issuance.
“It’s very slow,” said a trader in Florida. “No one is buying much of anything with rates where they are.”
Munis were gaining Friday morning, according to the Municipal Market Data scale. Inside the five-year, yields were steady. The five- and six-year yields fell up to two basis points. The belly of the curve had the biggest action, with yields falling up to three basis points. Yields on the long-end dropped about two basis points.
On Thursday, munis rallied and yields closed down across the curve. The 10-year closed down four basis points to 2.29% while the 30-year finished down two basis points to 3.79%. The two-year was flat at 0.42% for the twelfth consecutive trading session.
Treasuries were mostly flat from Thursday’s close. The two-year and 30-year are steady at 0.28% and 2.99%. The benchmark 10-year yield was up two basis points to 1.99%.
The primary market won’t see action Friday as traders digest heavy new issuance from earlier in the week. But certain credits in the secondary are trading strong.
“With dealer inventories now focused on recent new issues, we could see strong secondary activity for a few days ahead of the Thanksgiving holiday,” wrote Alan Schankel, managing director of Janney Capital Markets. “The combination of light forward supply, with less than $3 billion scheduled for next week and beyond, and the widespread price discovery opportunities realized from this week’s diverse new issue slate, bode well for munis.”
And indeed, trades reported by the Municipal Securities Rulemaking Board shows hefty gains in Friday morning trading.
A dealer bought from a customer New Jersey Transportation Trust Fund Authority 5.5s of 2031 at 4.50%, three basis points lower than where they traded Thursday.
Bonds from an interdealer trade of New Jersey TTFA 5.25s of 2023 yielded 3.79%, 11 basis points lower than where they traded Thursday.
A dealer sold to a customer Minnesota Tobacco Securitization Authority 5.25s of 2024 at 4.51%, 12 basis points lower than where they traded Thursday.
Bonds from an interdealer trade of Minnesota TSA 4.85s of 2026 yielded 4.80%, 13 basis points lower than where they traded Thursday.
Schankel added the high level of December reinvestment money from maturing bonds along with muni bond fund flows topping $1 billion are all positive factors that “should help munis outperform Treasuries in the near future.”
