The municipal market was slightly firmer Friday, with yields declining for the 12th consecutive session amid fairly light secondary trading activity.
"The long end is pretty quiet and flat, but there is a bit of firmness in the intermediate maturities," a trader in New York said. "On the whole, I'd say we're better maybe one or two basis points."
The Municipal Market Data triple-A 10-year scale fell four basis points Friday to 2.99%, the 20-year dipped four basis points to 4.26%, and the scale for 30-year bonds remained at 4.69%.
In the daily MMD commentary, Randy Smolik wrote "another week of light issuance next week and buoyant Treasuries kept the tax-exempt sector moving to lower yields."
"The belly of the curve is where the performance was," he wrote. "With the threat of violent clashes in Libya over the weekend, the flight-to-safety bid lingered. Extended rallies can be tiresome and the muni market was in their 12th day of making lower yields. But supply remains very light.
"With the tax-exempt calendar next week totaling a modest $1.7 billion, we now see 2011 tax-exempt supply at only 55% of the 2010 pace year to date," Smolik wrote. "Little wonder every day seemed to be a scramble to fill re-investment inquiry."
Friday's triple-A muni scale in 10 years was at 87.4% 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 109.3% of the comparable London Interbank Offered Rate.
Treasuries showed gains Friday. The benchmark 10-year note finished at 3.42% after opening at 3.48%. The 30-year bond finished at 4.51% after opening at 4.58%. The two-year note finished at 0.73% after opening at 0.75%.
In economic data released Friday, real gross domestic product expanded 2.8% at an annual rate in the fourth quarter, revised sharply lower from the initial estimate of 3.2% growth released last month, as consumer spending and government spending were revised down.
Consumer spending, which accounts for about 70% of GDP, increased 4.1% for the quarter ending Dec. 31. Revised retail sales data for November and December dragged the sector lower from the initial estimate of a 4.4% gain.
The smaller fourth-quarter brought down GDP growth for all of 2010. The U.S. economy expanded 2.8% in 2010, down from the 2.9% growth estimated last month, but still the largest annual GDP gain since 2005.
Personal consumption expenditures, excluding food and energy goods, increased 0.5% for the quarter, revised up from a 0.4% rise reported last month. The fourth quarter core PCE growth, which matched a 0.5% increase in the third quarter, is still a record low dating back to 1959.
Economists expected GDP to increase 3.3% for the quarter and for core PCE to gain 0.4%, according to the median estimate from Thomson Reuters.
The University of Michigan's final February consumer sentiment index reading was 77.5, compared to the preliminary 75.1 reading. Economists polled by Thomson had predicted a 75.1 reading for the index.