The tax-exempt market was quiet Friday as traders said they felt fatigued by record low yields these past few weeks and activity in general had started to stall.
After the 30-year yield hit record low yield of 3.05% as recorded by Municipal Market Data on Monday, yields started to drift mid-week and ended slightly weaker by the end.
“It’s very nonchalant,” a Chicago trader said. “It’s just primary-focused and everyone comes in on Monday, waits to see what deals are doing and see if they get allocated. If they don’t get the bonds they want, they put some money to work in the secondary for a few days, then go home on Friday to sleep for the weekend.”
Munis are choppy with these low rates, and it’s not going to change for the foreseeable future. “Until we get better rates, we are not seeing love out there,” he said. “Everyone is frustrated with rates.”
The headline risk coming out of Europe is also adding to the illiquidity of munis. “No one is worried about getting their money back in munis,” the trader said. “They are focused on what they are losing in the stock market. So when things get crazy, no one pays attention to munis because they are also going to be there.”
Munis were steady Friday, according to the MMD scale. The 10-year yield and the 30-year yield closed steady at 1.78% and 3.09%, respectively. The two-year yield remained steady at 0.31% for the 23rd consecutive trading session.
Overall for the week, the 10-year yield ended up three basis points and the 30-year finished up one basis point. The 10-year yield still remains 11 basis points above its record low of 1.67% set Jan. 18, while the 30-year yield is four basis points above its record low of 3.05% set Monday.
Treasuries were choppy Friday but ended the day mostly steady.
The benchmark 10-year yield and the 30-year yield finished flat at 1.71% and 2.80%. The two-year yield fell one basis point to 0.31%.
In the secondary market Friday, a sample of CUSIP numbers compiled by data provider Markit showed munis both firming and weakening.
Yields on Memphis, Tenn. 5s of 2017 fell one basis point to 0.95% while Broward County, Fla., Airport System 5s of 2022 dropped two basis points to 2.80%.
Yields on California 5.25s of 2022 rose two basis points to 2.66% while Florida 5s of 2024 jumped three basis points to 2.41%.
Over the past week, muni exchange-traded funds have done well. The iShares S&P National AMT-Free Municipal Bond ETF — ticker MUB — rose 0.06% from the week before, as well as the SPDR Nuveen Barclays Capital Short Term Municipal Bond ETF — ticker SHM — which rose 0.21%.
The PowerShares Insured National Muni Bond ETF — ticker PZA — fell 0.43%, while the ProShares Ultra Seven to 10 Year Treasury ETF — ticker UST — gained 1.57% over the past week.
Gains on muni ETFs look better year to date. So far this year, MUB gained 1.58%, SHM rose 0.41%, and PZA increased 3.48%. The UST also increased 4.84%.
In the primary market this week, $9.19 billion is expected to come to market, up from last week’s revised $6.83 billion.
In the negotiated market, $6.46 billion is expected to be priced, up from last week’s revised $5.13 billion.
On the competitive calendar, $2.73 billion is expected, up from last week’s revised $1.70 billion.