Municipals were stronger at mid-session as bond traders returned to their desks on Thursday awaiting minutes from the latest Federal Reserve meeting and word on next week’s supply by late in the day.

Financial markets were closed Wednesday in observance of Independence Day.

A sluggish and somewhat skittish tone kicked off the post-July 4th trading on Thursday, as many investors and market participants were still in holiday mode — and some were just cautious amid recent volatility.

"It appears to me that retail continues to be anxious in regard to both the equity and fixed income markets," Peter Delahunt, managing director of Raymond James & Associates Inc. commented on Thursday morning.

"Recent higher yields had led to an increase in demand for bonds," he said. "However, with the move back toward lower yields and the uncertainty for stock performance, monies continue to move toward cash equivalents, especially CDs, where the rates have become more competitive — even after taxes."

FOMC minutes on tap
This afternoon, the Federal Open Market Committee will give economists and investors an opportunity to parse the minutes of its June 12-13 meeting for signals of its agenda.

If the minutes show concern about dollar strength, it could suggest slightly less hawkish monetary policy, and lower bond yields, according to Wilmington Trust Economist Rhea Thomas.

Talk of the unemployment rate could also give clues to future policy, as a "pickup in wages would likely be taken as support for hawkish monetary policy."

As for trade jitters, "Any signs of a willingness to be more accommodative in the face of a rise in trade concerns would likely be deemed as dovish, and would potentially weigh on bond yields."

Secondary market
Municipal bonds were stronger on Thursday, according to a read of the MBIS benchmark scale. Benchmark muni yields fell as much as one basis point in the one- to 30-year maturities.

High-grade munis were also stronger, with yields calculated on MBIS’ AAA scale falling throughout the curve by as much as one basis point.

Municipals were stronger on Municipal Market Data’s AAA benchmark scale, which showed both the 10-year muni general obligation yield and the 30-year muni maturity falling by one basis point.

Treasury bonds were stronger as stocks traded higher.

On Tuesday, the 10-year muni-to-Treasury ratio was calculated at 86.4% while the 30-year muni-to-Treasury ratio stood at 98.9%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Previous session's activity
The Municipal Securities Rulemaking Board reported 25,179 trades on Tuesday on volume of $5.64 billion.

ICI: Long-term muni funds see $525M inflow
Long-term municipal bond funds saw an inflow of $525 million in the week ended June 27, the Investment Company Institute reported.

This followed an inflow of $742 million into the tax-exempt mutual funds in the week ended June 20 and inflows of $326 million, $648 million, $661 million, $185 million and $450 million in the five prior weeks.

Taxable bond funds saw an estimated inflow of $2.46 billion in the latest reporting week, after seeing an inflow of $3.81 billion in the previous week.

ICI said the total estimated outflows to long-term mutual funds and exchange-traded funds were $16.80 billion for the week ended June 27 after outflows of $1.72 billion in the prior week.

Primary market
Ipreo estimates weekly bond volume at $73.8 million, down from a revised total of $4.69 billion last week, according to updated data from Thomson Reuters. The calendar contains no negotiated deals, just competitive sales.

Bond Buyer 30-day visible supply at $5.31B
The Bond Buyer's 30-day visible supply calendar increased $1.04 billion to $5.31 billion on Thursday. The total is comprised of $2.05 billion of competitive sales and $3.25 billion of negotiated deals.

Treasury announces auction details
The Treasury Department announced these auctions:

  • $14 billion of 29-year 10-month 3 1/8% bonds selling on July 12
  • $33 billion of three-year notes selling on July 10;
  • $22 billion of nine-year 10-month TIPs selling on July 11;
  • $42 billion of 182-day bills selling on July 9; and
  • $48 billion 91-day bills selling on July 9.

Gary Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Vanessa Kim at 212-803-8474 for more information.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.