The municipal market was weaker by three to five basis points Friday amid fairly light secondary trading activity.
“Certainly the last week or two it’s been a little bit tougher to place bonds as rates are backing up and supply is looming,” said Jonathan Nordstrom, municipal department manager at Morgan Keegan & Co. “This week I think investors became more rate-sensitive and deals had to get cheaper in order to get them placed.”
“There certainly is concern that rates may need to back up some more in order for it to clear, but I don’t think we’re concerned as a firm that we won’t be able to find buyers for product,” Nordstrom said.
He said there continues to be a lot of demand for municipal bonds.
The Municipal Market Data triple-A scale yielded 2.43% in 10 years Friday, up five basis points from Thursday’s 2.38%, while the 20-year scale edged up three basis point to 3.32%, up from Thursday’s 3.29%.
The scale for 30-year debt yielded 3.72%, two basis points higher than Thursday’s 3.70%.
“It certainly felt weaker today,” a trader in Los Angeles said. “Yields have been edging progressively higher all week.”
Friday’s triple-A muni scale in 10 years was at 94.8% of comparable Treasuries and 30-year munis were at 100.3%, according to MMD, while 30-year tax-exempt triple-A general obligation bonds were at 110.8% of the comparable London Interbank Offered Rate.
The Treasury market showed some losses Friday. The benchmark 10-year note finished at 2.52% after opening at 2.51%. The 30-year bond finished at 3.72% after opening at 3.68%. The two-year note finished at 0.43% after opening at 0.42%.
In the new-issue market Friday, M.R. Beal & Co. priced for retail investors $610.3 million of personal income tax revenue bonds for the Dormitory Authority of the State of New York in two series.
Bonds from the $555.9 million Series E mature from 2011 through 2030, with term bonds in 2035 and 2040.
Yields range from 0.62% with a 2% coupon in 2012 to 3.35% with a 3.125% coupon in 2026.
Bonds maturing in 2011 will be decided via sealed bid. Those maturing from 2021 through 2025 and from 2027 through 2040 were not offered during the retail order period. The bonds are callable at par in 2020.
Bonds from the $54.4 million Series F mature from 2011 through 2030, with a term bond in 2035.
Yields range from 0.40% with a 2% coupon in 2011 to 3.92% with a 5% coupon in 2035. The bonds are callable at par in 2020.
The credit is rated AAA by Standard & Poor’s and AA by Fitch Ratings.
In economic data released Friday, personal income rose more than economists anticipated in August, surging 0.5% to post the largest gain since May of last year.
Spending on construction unexpectedly rebounded from a 10-year low in August, growing 0.4% to $811.8 billion as government projects offset waning private construction activity.
The Institute for Supply Management’s manufacturing index fell to 54.4 in September as new orders slowed, the Tempe, Ariz.-based group said Friday.
The factory gauge was at 56.3 in July. Readings above 50 represent growth. Lower readings signal contraction.
Dan Seymour contributed to this column.