The employment situation report brought the municipal market's sell-off to a halt, according to traders.
Municipal bonds began selling off at the beginning of the week after the ISM manufacturing report showed a strong number that beat analysts' predictions. The 10-year triple-A benchmark general obligation bond yield rose by eight basis points to 2.18% from Monday to Thursday, according to Municipal Market Data's triple-A scale. The 30-year increased by five basis points to 3.09% during the same period.
Traders attribute the market's steady opening to the employment report.
"Everyone was nervous it would cause the market to sell-off more, especially after the [ISM Manufacturing Index] number came out earlier," a trader in the south said. "But the employment numbers, sure unemployment rate fell, what? 0.1%? All the underlying numbers were weak."
The employment situation report also showed that nonfarm payrolls did grow for the month of October, but came in below analysts' expectations at 214,000.
One of the most important numbers that indicated weakness were the wage numbers, which showed average hourly earnings month over month only increased by 0.1% while analysts had theorized they would rise between 0.2% and 0.3%. Private payrolls for the month were 26,000 beneath analysts' predictions at 209,000.
Some traders though are disappointed the sell-off is not continuing.
"There is so much cash on the side lines these days!" a trader in Chicago exclaimed. "If munis became significantly cheaper to buy than Treasuries it could have been a really opportunity, a real chance for the municipal market to be flooded with cash."
Treasuries strengthened on Friday with the two-year note yield falling by two basis points to 0.54%, the 10-year dropping by seven basis points to 2.32%, and the 30-year by four basis points to 3.05%.
Inflows Gain After Three-Week Fall
Municipal bond fund inflows rose after declining for three straight weeks.
Funds that report weekly had $85.3 million of inflows for the period ending Nov. 5, up from $37 million the week before, according to Lipper FMI.
Assets of all weekly reporting municipal funds dropped to $313.7 billion from $313.9 billion. The four-week moving average dropped to $151.8 million from $321.0 million.
Flows for long-term muni funds were negative, as they reported $191.7 million in outflows. This is worse than last week when long-term muni funds showed $12.8 million in outflows.
Long-term municipal mutual fund assets dropped to $164.8 billion from $165.1 billion last week. The four-week moving average for the long-term funds was an inflow of $90.8 million, down from $224 million last week.
High yield funds recovered, reporting inflows totaling $18.4 million following outflows of $20.8 million previously. Assets rose to $48.1 billion from $47.98 billion last week. The four-week moving average fell to $82.7 million from $143 million.
