Munis Weaker After Stronger Payroll Data

The municipal market was weaker by two or three basis points Friday, following Treasury yields higher after July non-farm payrolls data came in stronger than expected.

"The jobs number was a bit better than we thought, so that's moving Treasuries, which are in turn moving us," a trader in New York said. "There's still not a whole lot of activity out there, but we're cheapening up a little bit, maybe two basis points overall."

"We're a bit weaker, obviously, coming off the economic news and the Treasury market, but we did outperform Treasuries," a trader in Los Angeles said. "You have Treasuries off 10 basis points or so, but we're probably worse only a basis point or two, maybe three in spots."

In economic data released Friday, non-farm payrolls dropped 247,000 in July, after a revised 443,000 decline the previous month. Economists polled by Thomson Reuters had predicted that 320,000 jobs were lost last month.

The unemployment rate declined slightly to 9.4% in July, from 9.5% the previous month. Economists polled by Thomson had predicted a 9.6% unemployment rate.

The Treasury market showed losses Friday. The yield on the benchmark 10-year note, which opened at 3.75%, was quoted near the end of the session at 3.86%.

The yield on the two-year note was quoted near the end of the session at 1.31% after opening at 1.20%. The yield on the 30-year bond, which opened at 4.53%, was quoted near the end of the session at 4.61%.

As of Thursday's close, the triple-A muni scale in 10 years was at 80.7% of comparable Treasuries, according to Municipal Market Data.

Thirty-year munis were 104.7% of comparable Treasuries. As of Thursday's close, 30-year tax-exempt triple-A general obligation bonds were at 105.2% of the comparable London Interbank Offered Rate.

Trades reported by the Municipal Securities Rulemaking Board Friday were flat to slightly weaker. Bonds from an interdealer trade of California 5s of 2025 yielded 5.02%, even with where they traded Thursday.

A dealer sold to a customer King County, Wash., 5s of 2038 at 5.10%, one basis point higher than where they were sold Thursday. Bonds from an interdealer trade of Texas 5s of 2022 yielded 3.70%, even with where they traded Thursday.

Bonds from an interdealer trade of Riverside, Calif., taxable Build America Bonds, 7s of 2029 yielded 7.05%, up one basis point from where they were sold Thursday. A dealer bought from a customer insured Massachusetts 5.25s of 2022 at 4.17%, even with where they traded Thursday. Bonds from an interdealer trade of insured Summerville, S.C., 4s of 2037 yielded 5.20%, up one basis point from where they were sold Thursday. A dealer sold to a customer Los Angeles Unified School District 5.3s of 2034 at 5.42%, even with where they traded Thursday.

Bonds from an interdealer trade of insured University of Arkansas 5s of 2034 yielded 4.97%, up one basis point from where they were sold Thursday.

Activity in the new-issue market was light Friday.

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