Full Week Bond Market Summary for Nov. 23 - Nov. 27
- Short-term U.S. Treasury yields were stable, while long-term yields declined last week.
- The market awaits to hear the news on November employment as well as the December Fed rate hike.
- Municipal bond prices went high last week.
- The U.S. Senate Judiciary Committee is scheduled to hold a hearing on the Commonwealth’s economic and fiscal condition for Puerto Rico.
Detail Report
- U.S. Treasury yields were mostly lower than last week. Despite the short week due to Thanksgiving, two-year yields closed at their highest since May 2010. Analysts believe this spike was due to the increasing reaction of investors towards December’s rate hike by the Fed.
- It is believed that Friday’s employment report for November will be closely watched by both policymakers and investors due to the Fed’s general focus on the state of the labor market.
- Municipal bond prices went high last week due to the firm government bond market and the focus on the December 1 coupon money that will soon need to be reinvested. Municipal fund flow last week was $684 million. The high-yield municipal bond market has seen positive returns in six of the last 10 December periods. Thus by looking at the past data and current inflows in municipal bonds, analysts see the possibility for attractive total returns.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Mountain View Los Altos Union High School District’s (CA) G.O. Bond:
Moody’s Investors Service has upgraded Mountain View Los Altos Union High School District’s (CA) outstanding general obligation bonds to Aaa from Aa1, totaling approximately $65.4 million. The district’s upgrade reflects its sizeable and growing tax base and also its strong financial profile, which is predicted to be strong through fiscal 2016.
Downgrades:
Little Miami Joint Fire District, OH’s GO Bond:
Moody’s Investors Service has downgraded Little Miami Joint Fire District, OH’s general obligation limited tax (GOLT) debt to Baa1 from A1. The bond has been downgraded due to the lack of sufficient current financial information. It also reflects the district’s expected declines in reserves.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.92% | 0 | 19 |
| 5-year | 1.65% | -4 | 13 |
| 10-year | 2.22% | -4 | 8 |
| 30-year | 3.00% | -2 | 7 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.72% | 0 | 18 |
| 5-year | 1.26% | -3 | 9 |
| 10-year | 2.03% | -3 | -1 |
| 30-year | 2.97% | -3 | 9 |
Yield Ratios – Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 97% |
| 30-year AAA Municipal vs. Treasury | 99% |
| High-Yield Municipal vs. High-Yield Corporate | 84% |
Puerto Rico
• There was not much movement in Puerto Rico’s market last week, but this week is considered an important one for the country and its creditors since the U.S. Senate Judiciary Committee is scheduled to hold a hearing on the Commonwealth’s economic and fiscal condition.
• Also, there is $534 million due for the Government of Development Bank (GDB) this week.
More Articles to Read
Slowing Muni Offerings Could Increase Prices. This article provides information regarding why muni bond issuances are likely to continue falling due to rising interest rates as well as why investors still may be interested in the asset class.
