The municipal market wrapped up the week on a slightly weaker note.
Investors mostly stood by and watched as the secondary saw light to moderate activity. Early trades on the day led some to see a firming market for Friday’s session. New York City’s Hudson Yards Infrastructure Corp. bonds and the Ohio State University taxables were reportedly trading rather consistently, much as they were late Thursday.
But the secondary market developed its own momentum, or lack thereof, as the day progressed. Just before noon, market activity slowed and yields weakened somewhat heading out the curve.
“We’re in about the same position we were in last week,” a trader in New York said. “We have an underlying sense of caution. It’s a healthy caution that, for the most part, is new-issue driven. We’re taking the new-issue pricing as they come: a day at a time.
Tax-exempt yields were slightly weaker approaching the long end of the curve Friday, according to the Municipal Market Data. Yields were steady through 21 years. Beyond that, they were one or two basis points higher.
The benchmark 10-year muni yield Friday held steady on the day at 2.43%. It remained 46 basis points above the record low it held on Sept. 23. For the week, it fell 13 basis points.
The two-year yield held at 0.45% for an eighth consecutive session. The 30-year yield skipped up two basis points to 3.71%. For the week, it lost one basis point.
Treasury yields weakened, as they have the past few sessions. The benchmark 10-year Treasury yield increased three basis points to 2.22%. On the week, after falling and rising, it lost one basis point.
The 30-year ended the day and the week seven basis points higher at 3.28%. The two-year yield held steady at 0.28%. On the week, it rose one basis point.
The muni market expects a total of $7.4 billion of new issuance to be sold this week. That compares to the $7.7 billion the market saw last week.
Three deals — two negotiated and one competitive — provided both a disproportionate share of the volume as well as direction for the market. Traders saw most of last week’s supply absorbed with minimal impact.
If anything, yields in the intermediate sector, particularly 10-years, firmed around 10 basis points. But the coming calendar could pose issues for investors, MMD analyst Randy Smolik wrote in a recent research post.
“The issuance of major deals is varied again and not compacted into a few mega sales like this past week,” he wrote. “But high-grade deals were not numerous, which could explain the mix feel for the high-grade curve currently.”
MMD weekly survey results showed that most sellside respondents were neutral on the market. That breaks down to 82% neutral, versus 9% who were both bearish and bullish.
Portfolio managers were more bearish, but their numbers among those ranks fell this past week, MMD survey figures showed. Their percentage of bearish respondents dropped to 25%, from 38% the previous week. Neutral portfolio managers represented 63% of respondents, against 50% the previous week. Bullish portfolio manager respondents held steady at 12%.
Municipal bond mutual funds saw a second straight week of inflows, and a sixth week out of seven. The week ending Oct. 19 saw $417 million of inflows from muni bond funds that report their flows weekly, according to Lipper FMI.
In the week ending Oct. 12, there were net inflows of almost $84 million.