The tax-exempt market ended flat to slightly stronger Wednesday continuing a week-long trend of muni yields following Treasury yields lower.
Limited primary issuance this week led to much more demand than supply, further strengthening munis.
And while traders noted that the market was expected to slow down ahead of the
"It's kind of sideways," a
Not all traders agreed. And a retail trader in
Other traders said the market looked stronger as demand continues to outweigh supply in this low-issuance week. And, that dynamic may continue into the fall months despite higher supply expected.
"It's going to be a tough one heading into election time, potential QE III, and ECB action," a second
The trader added that because there is negative net supply, the search for yield continues. "It's the same old story and more hunt for yield," he said, adding a Pennsylvania Higher Education deal for the
In the primary market Wednesday,
Yields ranged from 0.43% with a 2% coupon in 2013 to 3.12% with a 3% coupon in 2027. The bonds are callable at par in 2022.
On the competitive calendar, the
B of A Merrill won the bid for the first series of
B of A Merrill also won the bid for the second series of
In the secondary market, trades compiled by data provider Markit showed strengthening between one and four basis points. Yields
On Wednesday, the 10-year Municipal Market Data yield finished steady at 1.75% for the second session while the 30-year yield closed flat at 2.90% for the third consecutive trading session. The two-year closed at 0.29% for the 25th consecutive session.
While the muni market cheapened during the first few weeks of August, the strength in the market over the past six trading sessions has recouped almost all of those losses. Over the past week, the 10-year yield has plummeted 15 basis points while the 30-year yield has plunged 12 basis points, pushing yields down to levels last seen
The 10-year MMD yield now trades 15 basis points above its record low of 1.60% set
Treasuries posted losses on Wednesday after stronger trading sessions Monday and Tuesday. The benchmark 10-year yield and the 30-year yield jumped two basis points each to 1.66% and 2.77%, respectively. The two-year was steady at 0.28%.
Treasuries were strengthened by positive economic news released Wednesday morning. Real gross domestic product increased at an annual rate of 1.7% in the second quarter. The increase is better than the 1.5% growth originally reported in the advance estimate last month, and came in at economist expectations.
But not economists were optimistic. "The economy was sluggish in the second quarter and the slight upward revision to GDP does nothing to change that picture," wrote economists at RDQ Economics. "Slow nominal GDP growth will be used by some as an argument in favor of expanding the Fed's balance sheet at the September FOMC meeting."
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