Tax-exempt prices firmed yesterday on the release of the Chicago Purchasing Managers' report, which showed continued anemic economic activity and boosted demand for municipal bonds.
The Chicagoland business barometer fell to 46% in December from 53.2% in November,the Purchasing Management Association of Chicago said.
An index reading below 50% signals a slowing economy, while a level above 50% suggests expansion.
The Treasury market proceeded to climb 3/4 point on the news, and municipals followed in the distance. Trading was mostly professional on thin volume and prices were up 1/8 point on average, but some bonds were quoted up 1/4 point.
"It's very firm, but it's difficult to find someone who is willing to actually execute a trade," said one market player. "Most people marked bonds up a bit to keep from losing any ground and that was the extent of it."
In the debt futures market, the March contract settled up 12/32 to 97.10.
New issue activity in the primary sector will be dormant until next week, but The Bond Buyer's 30-day visible supply came off the bottom yesterday, rising to $993 million. The calendar is dominated by $775 million New Jersey Turnpike revenue bonds, to be priced by a group including Goldman, Sachs as senior manager.
Secondary supply remains thin. Standard & Poor's Blue List of dealer inventory fell $55.5 million from Friday to $719 million, a new low for the year.
As a result, secondary trading was muted, especially ahead of today's shortened New Year's Eve session. Traders reported few bid-wanteds and no customer lists out for the bid.
In secondary dollar bond trading, Denver Airport 7 3/4s of 2021 were quoted at 98 3/4-99 1/4 to yield 7.81%; Port Authority of New York and New Jersey 6 1/2s, subject to the AMT, of 2026 were quoted at 98 1/2-99 1/4 to yield 6.55%, and Pennsylvania Turnpike 6 1/2s of 2013 were quoted at 99 5/8-100 to yield 6.50%.
In the short-term note sector, activity was also subdued with yields mostly unchanged on the day.
In late secondary trading, California Rans were quoted at 3.05% bid, 3% offered as were Los Angeles Trans and Texas Trans. In the New York market, city Rans were quoted at 4.40% bid, 4.30% offered, while New York State Trans were quoted at 4.25% bid, 4.20% offered.