The tax-exempt market ended steady on Friday, capping a week of mostly unchanged yields and relatively quiet activity in the secondary market.
“The market is painfully slow,” a New York trader said Friday, but it’s looking forward to the $1.8 billion Illinois general obligation bond issue expected to price this week. “It feels like everyone is holding off and seeing how that gets digested.”
Munis were steady Friday afternoon, according to the Municipal Market Data scale, ending the week with muni yields mostly unchanged.
On Friday, the two-year yield closed flat at 0.31% for the eighth consecutive trading session, while the 30-year ended flat at 3.25% for the fifth consecutive session. The 10-year yield finished at 1.87% for the third consecutive session and two basis points higher than at the beginning of the week.
Treasuries were mostly steady. The two-year yield and the 30-year yield were flat at 0.27% and 3.12%, respectively. The benchmark 10-year yield fell one basis point to 1.94%.
On Friday, the secondary market showed munis were both stronger and weaker. According to a sample of CUSIP numbers compiled by data provider Markit, half of the yields fell while the other half rose.
Yields on East Side, Calif., Unified High School District 5s of 2027 fell four basis points to 3.49%.
Yields on California 5.5s of 2029 dropped two basis points to 2.01% while yields on Clear Creek, Texas, Independent School District 5s of 2023 fell one basis point to 2.50%.
Other yields rose. Yields on Massachusetts 3s of 2026 jumped eight basis points to 2.90%, while yields on Denton, Texas, 5s of 2024 increased four basis points to 2.75%.
Yields on Massachusetts Bay Transitional Authority 5s of 2025 rose one basis point to 2.73%.
During April, muni-to-Treasury ratios rose on the short and long end as munis underperformed and became relatively cheaper.
The five-year muni yield to Treasury yield rose to 97.6% from 96.1% on the first day of trading in April. The 30-year ratio jumped to 103.8% from 101.5% at the beginning of April.
The 10-year muni-to-Treasury ratio fell slightly to 95.9% from 96.8% in early April as munis outperformed Treasuries and became comparatively more expensive.
The slope of the yield curve fell during April to 305 basis points from 321 as investors moved further out on the curve in search for yield.
The 10- to 30-year slope of the curve increased to 138 basis points from 126 basis points as buyers showed more interest in the belly of the curve than on the long end.
Triple-A to single-A credit spreads show investors are more willing to slip down the credit scale on the short and long end, but prefer high-grade bonds in the belly of the curve.
The two-year triple-A to single-A spread remained at 39 basis points during April, while the five-year spread fell to 62 basis points from 67 at the beginning of the month.
Further out on the curve, investors were also willing to move down the credit scale. The 30-year triple-A to single-A spread fell to 76 basis points from 78 at the beginning of the month.
But in the belly of the curve, investors moved out of the higher-yielding bonds into high-grade debt. The 10-year triple-A to single-A spread jumped to 81 basis points from 78 at the start of April.
Looking to this week, the municipal market can expect $6.09 billion in new issuance, down slightly from last week’s revised $6.1 billion.
On the negotiated calendar is $5.37 billion, up from last week’s revised $4.19 billion.
In competitive offerings, $719.3 million is expected, down from last week’s revised $1.91 billion.
In economic news Friday, real gross domestic product increased at an annual rate of 2.2% in the first quarter. The advance estimate fell short of the 2.5% that economists had projected.