To say the tax-exempt market finished last week on a high note is an understatement. Munis had a fantastic week, with prices showing double-digit gains and yields setting new record lows as each day passed.

“Customers are buying everything in sight,” a trader in New York said. “It’s an extremely busy Friday.” That seemed to be the theme of every trading session last week.

Throughout the week, the two-year fell seven basis points, the 10-year yield fell 14 basis points and the 30-year yield dropped an astonishing 30 basis points, according to the Municipal Market Data scale.

On Friday alone, munis did not let up, as they had a significant rally after already starting the week off on a strong note. Inside the five-year, munis were flat to three basis points firmer. The six-year yield dropped two basis points and the seven-year dropped three basis points. Eight- and nine-year yields fell four basis points, yields on the 10-year dropped five basis points, yields on the 11- to 13-year plunged six basis points, and yields on the 14- to 20-year plummeted seven basis points. Outside 21 years, yields took an eight- to nine-basis-point nosedive.

On Friday, the two-year closed steady at 0.35%. The 10-year yield closed down five basis points to 1.71%, beating the previous record of 1.76% recorded by MMD Thursday. The 30-year dropped nine basis points to 3.20%, beating the previous record of 3.29% as registered on Thursday.

Treasury yields declined throughout the week, hitting 2012 lows briefly on Friday. During the week, the two-year yield fell three basis points to 0.23%. The benchmark 10-year yield dropped nine basis points and the 30-year yield fell 11 basis points.

But with muni yields hitting new record lows almost daily last week, there was some skepticism in the market about how long the rally can last.

“There is disbelief in the continued MMD bumps, but here they come again,” a Los Angeles trader said. “We are waiting for the calendar to ramp up and see how real this is and if the market will hold.”

Overall, for the week, there was a “strong tone for people who want to sell,” he said. “Prices keep going up. It’s all the same types of things we’ve been seeing. There is not enough supply in the market and there are more people who want to buy than there are sellers.”

In the primary market last week, deals were priced extremely well, with some traders noting prices were bumped 10 basis points in some cases.

In the secondary market, trades reported by the Municipal Securities Rulemaking Board showed even more eye-popping numbers.

Bonds from an interdealer trade of Oklahoma Transportation Authority 5s of 2026 yielded 2.55%, 49 basis points lower than where they traded the previous Friday. Bonds from an interdealer trade of New York Liberty Development Corp. 5s of 2041 yielded 3.75%, 34 basis points lower than where they traded the week before.

Bonds from another interdealer trade of California 4.75s of 2027 yielded 3.26%, 23 basis points lower than where they traded the previous Friday. A dealer sold to a customer Washington 5s of 2041 at 3.47%, 39 basis points lower than where they traded the previous Friday.

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