Municipal bonds were little changed and lightly traded Friday, with the exception being a flurry of morning activity in high-grade, short-maturity bonds.

Only two issuers sold bonds to retail investors:

-- $200 million future tax secured bonds for the New York City Transitional Finance Authority in two series; Aa1/AAA/AA+; retail only.

-- $155 million general revenue bonds for the Boston Water and Sewer Commission in two series; Aa2/AA+/AA; retail only.

In terms of day-to-day total returns:

-- The high-grade, short end of the curve showed a total return of positive 0.001%, according to Municipal Market Advisors data.

-- The high-grade, intermediate part of the curve showed a total return of 0.00%.

-- The high-grade, long end of the curve showed a total return of positive 0.01%.

The high-grade marketplace of bonds rated double-A or better saw limited secondary activity. Supply will continue to be significant in the next two weeks, and many believe yields will continue to rise (and prices decline) as a result.

Early in the day, markets were made on high-grade bonds maturing in the 5-year range, as well as pre-refunded bonds. It appears these accounts were selling the short bonds with the intention of buying longer-maturity securities, a trend of the past five or six trading sessions.

In the non-investment grade sector of non-rated bonds or triple-B and lower, activity was muted. However, a few multimillion-dollar block trades of long maturity bonds issued by Main Street Natural Gas Inc. took place.

The new-issue market is usually a nonevent on Fridays, but two retail order periods did take place. As we have mentioned before, the retail investor has become more important in the municipal market as institutions have less need for tax-exempt income. Friday's retail order periods are an example of issuers allowing as much time as possible to get individuals interested in their offerings.

Municipal bond mutual fund inflows were larger in February than in January. March is also starting out strong, with the first week of the month seeing more than $700 million in new investments. This can only act to bolster the buy side.

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ICI Tax-Exempt Mutual Fund Inflows ($Bn)
Municipal Market Advisors
Matthew Posner is a director with Municipal Market Advisors. Posner writes intraday research, data and commentary on the municipal market and heads up the firm's efforts in Washington, D.C., as an educator of policy markers on the tax-exempt securities market. Founded in 1995, MMA is the leading independent strategy, research and advisory firm in municipal bond industry.