The municipal market remained slightly firmer Thursday amid moderate secondary trading activity.
"We're a little firmer again," a trader in New York said. "Same story, different day. We keep ticking a bit lower in yield every day."
The Municipal Market Data triple-A 10-year scale fell four basis points Thursday to 3.03%, the 20-year dipped three basis points to 4.30%, and the scale for 30-year bonds declined three basis points to 4.69%.
In the daily MMD commentary, Randy Smolik wrote: "The extended rally in munis, which is approaching a month in duration, created more selling from customers."
"Yet, with primary issuance expected to stay subdued through March, sell lists produced stronger bids today," Smolik added. "Hard to fight the strength when Treasury yields are moving lower, as well."
"Several weeks ago, with a limited primary calendar and customer selling slowing to a trickle, it seemed obvious that the path of least resistance was to lower yields," he wrote. "Now that the muni rally is nearly one month old and intermediate maturities are making new yield lows for the current year on a daily basis, more sellers are surfacing."
But traders are still paying stronger levels, according to Smolik.
"Modest primary issuance is expected to last through March," he wrote. "And, with Treasuries ratcheting lower in yield as tensions heat up in the Mideast, it is hard to fight the muni market strength."
Thursday's triple-A muni scale in 10 years was at 88.1% of comparable Treasuries and 30-year munis were at 103.3% according to MMD. Meanwhile, 30-year tax-exempt triple-A general obligation bonds were at 108.8% of the comparable London Interbank Offered Rate.
Treasuries showed gains Thursday. The benchmark 10-year note was quoted near the end of the session at 3.46% after opening at 3.48%. The 30-year bond was quoted near the end of the session at 4.55% after opening at 4.58%. The two-year note was quoted near the end of the session at 0.75% after also opening at 0.75%.
The Treasury Department auctioned $29 billion of seven-year notes, with a 2 3/4% coupon, a 2.854% high yield, a price of 99.34. The bid-to-cover ratio was 2.86. Federal Reserve banks bought $1.59 billion for their own account in exchange for maturing securities.
In the new-issue market Thursday, Wells Fargo Securities priced $120 million of electric revenue bonds for South Carolina's Piedmont Municipal Power Agency in two series.
Bonds from the $90 million Series C mature from 2026 through 2030 with a term bond in 2034. Yields range from 4.96% with a 4.75% coupon in 2026 to 5.58% with a 5.75% coupon in 2034. The bonds are callable at par in 2021.
Bonds from the $30 million Series D mature from 2026 through 2030 with a term bond in 2034. Yields range from 4.96% with a 4.75% coupon in 2026 to 5.58% with a 5.75% coupon in 2034. The bonds are callable at par in 2021.
The bonds are backed by Assured Guaranty Municipal Corp.
The underlying credit is rated Baa1 by Moody's Investors Service, A-minus by Standard & Poor's, and BBB-plus by Fitch Ratings.
JPMorgan priced $67.9 million of adjustable-rate revenue bonds for the Illinois Finance Authority.
The bonds mature in 2034, yielding 1.75% priced at par, and are not callable. The short-term credit is rated VMIG-1 by Moody's and F1-plus by Fitch.
In economic data released Thursday, durable goods orders rose 2.7% in January, driven by orders for aircraft, as durable orders excluding transportation dropped by 3.6%, the largest amount in a year.
The drop in durable orders excluding transportation was its first in four months. Durable orders for transportation goods jumped 27.6% for the month as businesses placed orders for nonmilitary aircraft and parts.
Economists expected durable goods would increase 2.7% and durable orders excluding transportation would increase 0.4%, according to the median estimate from Thomson Reuters.
Seasonally adjusted initial jobless claims fell to 391,000 for the week ending Feb. 19, a decrease of 22,000 from the previous week's revised figure of 413,000.
Continuing claims dropped to 3.790 million for the week ending Feb. 12, the lowest since Oct. 18, 2008, when there were 3.764 million continuing claims. The 3.790 million figure showed a decrease of 145,000 from the preceding week's revised level of 3.935 million.
The figures were lower than the 400,000 of initial claims and 3.880 million of continuing claims projected by economists, according to the median estimate from Thomson Reuters.
New home sales fell 12.6% in January to a seasonally adjusted annual rate of 284,000, as the median sales price declined and the supply increased.
December new home sales were revised lower to 325,000 from 329,000 reported last month.
Sales plunged in the West, offsetting a strong increase in December sales. New homes bought in the South fell to a record low. Sales increased in the Northeast and Midwest.
Economists polled by Thomson Reuters had expected 310,000 new home sales for the month, according to the median estimate.