The municipal market ended a volatile week with yields wider by two basis points on Friday.
Broader concerns about Europe’s debt problems caused the VIX, a benchmark for stock market volatility, to jump to its highest level since April 2009.
Muni activity was relatively light as traders chose to wait until next week for markets to calm down.
“If traders had any sense, they were in sit-and-watch mode,” a trader in New York said. “What’s happening was not a muni event, so it’s something you don’t just jump into, because all you’re going to do is be wrong.”
“There aren’t too many buyers in the market — they’re taking a backseat, taking a breather,” a trader in California said. “They all know everything will still be there next week and maybe they can buy something a little cheaper then.”
The triple-A scale yielded 2.95% in 10 years on Friday, two basis point higher than Thursday’s 2.93% but much stronger than the late March level of 3.09%, according to Municipal Market Data. The scale yielded 4.01% in 30 years, two basis points weaker than on Thursday.
Those changes were relatively stable compared to the Treasury market, where the benchmark 10-year yield closed at 3.43% after earlier dropping to 3.31% in the morning — the lowest level since Nov. 24.
The 30-year Treasury, which closed Thursday at 4.17%, dipped to 4.13% Friday morning but then ended the week at 4.28%. The two-year Treasury yield moved up from 0.79% on Thursday to close Friday at 0.83%.
New-issue demand remained high in the muni market.
“If you’re bringing new issues, you’ve got gold,” one trader said. “Underwriters are making a good bit of change right now.”
The largest deal on Friday was $400 million of subordinate-lien revenue bonds for the North Texas Tollway Authority.
The issue, launched for institutions on Thursday, was priced by JPMorgan and structured in three series, all rated Baa3 by Moody’s Investors Service.
A $90 million tax-exempt portion offered a 2023 maturity with a 5.75% yield, while a taxable Build America Bond piece for $50 million offered a 2030 maturity with an 8.41% yield, 420 basis points over Treasuries. A $260 million BAB piece also matures in 2030 but offered an 8.91% yield, 470 basis points over Treasuries.
Proceeds will help finance the new State Highway 161 toll project, which is a north-south thoroughfare on Dallas’ eastern edge in the heart of the metro area.
Elsewhere, Bank of America Merrill Lynch issued a final pricing for $200 million of airport system junior-subordinate lien revenue bonds for Clark County, Nev. The bonds, rated A1 by Moody’s and A by Standard & Poor’s, mature in July 2012 with a 1.78% yield.
In economic news, a stronger-than-anticipated 290,000 jobs were created in April, according to the Labor Department’s nonfarm payrolls report.
“Barely nineteen hours after one of the biggest 10-minute sell-offs of risk in contemporary memory, the Labor Department came through with the best economic news we’ve had in months: payrolls have been expanding at a rapid clip for about two months now,” said Guy LeBas, fixed-income strategist at Janney Capital Markets.
The unemployment rate rose two basis points to 9.9% as a higher percentage of people were included in the labor force — 65.2% in April versus 64.9% in March.