Munis steady, USTs largely ignore jobs report

Muni yields were little changed on Friday following the stronger-than-expected nonfarm payrolls report, as U.S. Treasuries richened slightly and equities ended higher.

Munis were little changed across all maturities; UST yields fell by up to three basis points.

"It has finally started to feel that the rates market has started to turn from the upper end of the trading range this week," Barclays (BCS) strategists wrote, but news from the Middle East will determine whether this trend will continue.

"Tax-exempt yields have become attractive at the moment (even though muni ratios are close to fair value)," Barclays (BCS) strategists wrote, "and it is no surprise that this week's fund inflows were the largest in nearly two months."

Nonfarm payrolls
A stronger-than-expected 115,000 nonfarm payroll gain in April was shrugged off by the markets, which remain focused on Middle East events.

The "solid" report suggested "labor-market stabilization," according to Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.

U.S. Treasury yields were slightly firmer following the release, but "the market focus remains on developments in the Middle East. Fed-fund futures continue to point toward little movement in Fed policy this year," she said.

Subadra Rajappa, head of research at Societe Generale (SCGLF), said, "In this environment we see no clear catalyst for a sustained selloff in bonds and a sell-off toward the key thresholds of 4%, 4.5% and 5% in two-year Treasury, 10-year Treasury and 30-year Treasury yields [respectively], remains an opportunity to leg into longs, as the bias remains toward a resolution of the conflict leading to lower bond yields and oil prices."

New-issue calendar
Issuance for the week of May 11 is an estimated $12.353 billion, with $10.407 billion of negotiated deals on tap and $1.946 billion of competitives.

The negotiated calendar sees four mega deals, led by the Airport Commission of the City and County of San Francisco with $1.179 billion of second series revenue refunding bonds.

The other three deals are the Dormitory Authority of the State of New York with $1.174 billion of school district revenue bond financing program bonds, Connecticut with $1.12 billion of GOs, and Atlanta with $1.102 billion of water and wastewater subordinate lien revenue and revenue refunding bonds.

The competitive calendar is led by Fairfax County, Virginia, with $341.695 of sewer revenue bonds in two series.