The tax-exempt market ended the week on a strong note as last-minute shoppers made final purchases, pushing the 10-year yield to a new low.
The new record didn’t get much reaction from the markets. “There was little or no follow-through after Municipal Market Data announced a historical low on the 10-year spot,” a trader in New York said. “That could be due to half the Street being gone for the weekend.”
He added there were buyers in the morning, “but by midday, liquidity started to really dry up.”
And while most traders on Friday went home to begin vacation early, it was the deals earlier in the week that started the buying spree. A trader in Atlanta called New York’s $700 million Empire State Development Corp. sale one of the “most interesting deals,” and the $145.6 million North Carolina Garvee issuance was three times oversubscribed.
The standout, however, was arguably the District of Columbia’s $400 million income-tax secured revenue deal. After 100% of the $200 million negotiated deal was sold Tuesday to retail, the city decided to price the additional $200 million through a negotiated offering instead of the original scheduled competitive transaction. A New Jersey trader said yields were lowered as much as seven basis points.
Buyers scrambling for bonds buoyed munis on Friday and throughout last week. On Friday, the six-to-14-year yield fell one basis point while the 15-to-18-year maturities fell two basis points. Yields beyond the 19-year maturity fell one basis point.
Over the week, munis yields finished down. The 10-year yield dropped four basis points over the week to close at 1.93% on Friday, dropping the yield to a level not previously recorded.
Before last week, the last time the 10-year neared this level was September, when the Federal Reserve announced its “Operation Twist” and pushed the 10-year yield down to 1.97%.
The 30-year muni yield dove seven basis points over the week to close at 3.62% on Friday. The two-year yield held steady at 0.36%.
Treasuries rallied even more. The benchmark 10-year yield dove 18 basis points throughout the week, closing at 1.85% on Friday. The 30-year yield plummeted 20 basis points since last Monday to finish the week at 2.86%. The two-year yield held steady at 0.24%.
In the secondary market, trades reported by the Municipal Securities Rulemaking Board on Friday showed firming throughout last week.
A dealer bought from a customer New York Liberty Development Corp. 5s of 2041 at 4.28%, 12 basis points lower than where they traded last Tuesday. A dealer sold to a customer Oklahoma Transportation Authority 5s of 2027 at 3.25%, eight basis points lower than where they traded last Monday.
Expected in the primary this week is $905.2 million of new issuance, including $365.5 million in negotiated deals and $539.8 million in competitive sales.