Municipal bonds' reaction to the payroll number released on Friday has put more interest on the economic data scheduled for release next week, traders said.
Municipal bonds strengthened after the weak employment situation report was released, boosting the belief the market is reacting more to the economic numbers published, investors said.
The report showed that payrolls in August rose only 142,000 when the market had been expecting a 230,000 increase. Private payrolls increased by 134,000, lower than analysts' forecast that they would climb between 187,000 and 270,000.
After the report came out yields on bonds maturing from 12 to 30 years fell by as much as one basis point, according to Municipal Market Data's triple-A scale. Municipal bonds, particularly the long maturities, have been selling off all week rising by eight basis points to 3.29% for the 30-year on Thursday from last Friday, and by five basis points to 2.13% for the 10-year during the same period, according to data from Municipal Market Advisors.
"The market is reacting more and more to the economic data coming out," a trader in New York said. "It will be interesting to see what happens when more data is released next week."
The retail sales numbers is scheduled to come out next Friday.
"If the market keeps reacting this dramatically to data, that has potential to shake things up," a trader in Chicago said.
Lipper
Inflows for all municipal bond funds slowed as munis slumped during the week ending Sept. 3rd.
Funds that report weekly showed inflows of $379.8 million for the week, down from $446.4 million the previous week, according to Lipper FMI.
Yields on the 30-year rose by eight basis to 3.29% on Thursday from Friday last week, and by five basis points to 2.13% on the 10-year during the same period, according to data provided by Municipal Market Advisors.
The market was selling-off following the Treasury market, where yields began rising on Tuesday after positive economic news.
Assets of all weekly reporting municipal funds rose to $299.4 billion from $298.5 billion last week. The four-week moving average inflow rose to $480.8 million from $384 million.
Long-term municipal mutual fund assets rose to $161.4 billion from $160.88 billion last week. The four-week moving average of the long-term fund was an inflow of $257.7 million, up from $239.9 million last week.
High yield fund inflows declined to $104.1 million from $229.8 million the week before. This is the third week in a row high yield fund inflows have declined.
Assets increased to $461.7 billion from $454.5 billion. The four-week moving average was $241.2 million, up from $230.3 million.
Week Ahead
The three top negotiated issuances scheduled next week are $372.7 million Chicago second lien water revenue bonds that PNC Capital Markets is expected to price on Wednesday.
Wells Fargo Securities is expected to price $286.4 million Pennsylvania Turnpike Special obligation taxable bonds on Wednesday, and Citigroup is scheduled to sell $274 million Minneapolis St. Paul International Airport bonds on the same day.
The competitive calendar is dominated by $2.8 billion California revenue anticipation notes scheduled for auction on Wednesday.
