The municipal market was mostly weaker Friday amid fairly light secondary trading activity.

Traders said tax-exempt yields were higher by three or four basis points on the long end and up one or two basis points inside of 20 years.

“We still have some bid-wanteds out on the long end that are applying some pressure,” a trader in Los Angeles said. “It’s keeping yields elevated out there.”

The Municipal Market Data triple-A 10-year scale was higher by three basis points Friday to 3.38%, the 20-year scale increased four basis points to 4.61%, and the scale for 30-year bonds climbed five basis points to 4.92%.

“Right now, the market’s a little bit disjointed,” said Tom Spalding, senior investment officer at Nuveen Investments. “I think we’re just in a transition phase. The yields are certainly generous to entice retail back. I just think we need to see a little more stability.”

“There’s some weakness out long again,” a trader in New York said. “Treasuries are still weakening and that’s having somewhat of an impact. We’re probably down three or four basis points out long.”

Friday’s triple-A muni scale in 10 years was at 92.9% of comparable Treasuries and 30-year munis were at 104.0% according to MMD.

Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 109.6% of the comparable London Interbank Offered Rate.

Treasuries were weaker Friday. The benchmark 10-year note was quoted near the end of the session at 3.65% after opening at 3.54%. The 30-year bond was quoted near the end of the session at 4.74% after opening at 4.66%. The two-year note was quoted near the end of the session at 0.77% after opening at 0.71%.

James Ahn, a portfolio manager at JPMorgan, said the rally that stabilized the municipal market in the second half of January was driven by crossover buyers lured by high yields at the long end.

With the 30-year triple-A yield sinking almost 20 basis points in the last two weeks of January, those buyers moved on to other markets, he said.

“That interest has waned somewhat as the long end of the municipal curve has retraced some of the losses it sustained,” Ahn said. “Since the market is off from the absolute cheapest levels, the low-hanging fruit seems to have been taken out by crossover buyers. Interest from non-traditional accounts has definitely slowed.”

Meanwhile, Ahn believes retail remains “apathetic at best.” He pointed to this week’s $775 million New York Transitional Finance Authority deal, which reportedly was only 16% subscribed by pure retail investors. By comparison, last month the same issuer brought an $875 million bond to market and it was 40% subscribed by retail.

Ahn thinks the market needs to cheapen from these levels to get retail interested.

“We’re very cautious and defensive in general, even despite the relatively low new-issue supply,” he said. “We feel in the near-term credit spreads could widen.

Activity in the new-issue market was light Friday.

In economic data released Friday, nonfarm U.S. payrolls increased by a disappointing 36,000 in January as the unemployment rate dropped to 9.0%, the lowest level since April 2009, and severe winter weather affected employment in some sectors.

The winter storms across the country in January may have impacted employment and wages, specifically in the construction sector, the Labor Department said. Construction payrolls shed 32,000 jobs for the month, the largest decline since May. While some people may have lost work because of the snow storms, others who deal with clean-up or repairs may have been added to payrolls.

Economists expected an increase of 146,000 in total payrolls and 155,000 in private payrolls, according to the median estimate from Thomson Reuters. Economists said the unemployment rate would increase to 9.5%.

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