The 10-year tax-exempt took the spotlight last week as yields fell nine basis points over the course of five days.

The two- and 30-year tax-exempt yields also fell, though not as much. The two-year ended the week down two basis points from the previous Monday, at 0.42%. The 30-year was down four basis points for the week, closing at 3.71%.

The week provided much drama, with Greece leading the way, pushing investors into safe-haven assets for many of the trading sessions. But drama subsided Friday and munis were quiet as the market digested all the new deals spawned during one of the year’s largest weeks of new issuance.

“It’s pretty quiet today and the market is taking a feel for the week from all the new deals,” a trader in New York said. “There is not much going on by way of directional trading so the secondary seems pretty quiet. Overall, the market is steady.”

The yield curve finished Friday unchanged, according to the Municipal Market Data scale.

Treasury yields fell slightly. The two-year fell one basis point to 0.23% and the 30-year yield fell two basis points to 3.10%. The benchmark 10-year fell three basis points to 2.04%.

The secondary was quiet, but trades reported by the MSRB showed gains. A dealer bought from a customer Massachusetts Educational Financing Authority 4.6s of 2022 for 4.69%, two basis points lower than where they traded Thursday. A dealer bought from a customer Puerto Rico Public Buildings Authority 5.65s of 2028 at 5.56%, two basis points lower than where they traded Thursday.

Muni-to-Treasury ratios were mixed during the week. The 10- and 30-year munis outperformed relative to the five-year. The five-year ratio increased all week, from 126% on Monday, to 132.2% on Tuesday, to 133.7% on Wednesday. The ratio declined slightly Thursday to 130.8%.

The 10- and 30-year spots aren’t as attractive as those ratios declined as last week progressed. After peaking at 115.2% on Tuesday, the 10-year muni-to-Treasury ratio decreased to 114% on Wednesday and 111.7% on Thursday. Similarly, the 30-year muni-to-Treasury ratio peaked on Tuesday at 122.1%, and then declined to 120.4% on Wednesday and 119.3% on Thursday.

A weekly MMD survey on investor sentiment showed that new supply remains the biggest fear factor. Traders have not changed their outlook for the short term, with 46% of the traders holding bearish views on the market, followed by 45% who are neutral. Only 9% are bullish.

Portfolio managers have increased skepticism of the market for the short term, with 40% saying they are bearish, up from 30% last week. Portfolio managers who say they are neutral on the market are down to 40% from 50%. For the second straight week, 20% said they were bullish.

Muni bond fund flows were positive for the fourth consecutive week, though the inflows slowed, according to Lipper FMI. For the week ending Nov. 2, muni bond funds that report flows weekly recorded $141 million in net inflows. The week ending Oct. 26 saw net inflows of $310 million.

“Municipal bond mutual funds reported positive inflows again this week, but the level of the net inflows has been trending down for the last few weeks,” wrote Chris Mauro at RBC Capital Markets. “The only bright spot of this week’s report was tax-exempt money market funds, which saw their usual early-month inflows from municipal bond coupon payments.”

In economic news, the economy generated 80,000 new jobs, slightly below expectations, though August and September had upward revisions of 102,000. While job gains were widespread in the private sector, governments cut 24,000 positions.

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.