MunicipalBonds.com provides information regarding the performance of muni bonds for the past week in comparison with Treasury yields, as well as details regarding the net inflow in the muni market.
Treasury yields and equity prices dropped again last week due to the weakness in China and the turmoil in commodities, especially in oil and gas prices.
There was also a notable upgrade in Comsewogue Public Library Revenue Bonds by Moody’s, the details of which are provided below. Also, we provide a quick outlook on Puerto Rico’s bond market performance.
Full Week Bond Market Summary for January 11-15
- Treasury yields declined more than five basis points last week.
- The market continues to postpone expectations of the next Fed rate hike.
- Municipal bond yields remained unchanged last week with only little change in short-term maturity bonds.
- Puerto Rico officials will meet the U.S. Treasury Secretary this week.
Detailed Report
- U.S. Treasury yields experienced maximum downturn on Tuesday and Friday last week. Treasury bonds for 2-, 5-, 10- and 30-year maturities declined by more than 5 basis points.
- On Tuesday, the decline was mainly driven by the drop in commodity prices and weakness in the Chinese market. Friday’s decline came in response to weaker retail sales and empire manufacturing reports.
- There has been an increasing probability in the market that the next Fed rate hike will be postponed, indicating the market’s skepticism about the Fed’s decision to raise the rate four times this year.
- 2- and 5-year maturity muni bonds changed by a few basis points last week, while 1- and 3-year maturity munis remained unchanged, indicating a positive outlook in muni investing during this bear market.
- Municipal fund flows totaled $995 million last week, and the new issue market totaled $8.3 billion. This week’s new issue supply is only $5.3 billion compared to $8.3 billion last week.
- High-yield muni bond fund flows reached $400 million last week, larger than any week in 2015, keeping muni bonds durable.
- Puerto Rico officials will meet this week with the U.S. Treasury Secretary, who has mentioned that only Congress has the power to help the Commonwealth manage its debt crisis. The market looks forward to this meeting and its outcomes.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Comsewogue Public Library Revenue Bonds:
Moody’s Investors Service has upgraded the Comsewogue Public Library, NY Revenue Bond to Aa2 from Aa3. The upgrade reflects the library’s moderately sized tax base, above-average resident wealth levels, ample reserves and liquidity, minimal debt burden, average pension liability and strong legal provisions governing repayment of the bonds.
Downgrades:
City of Robstown’s (TX) General Obligation:
Moody’s Investors Service has downgraded the city of Robstown’s (TX) General Obligation Bond’s rating to Ba2 from Baa2. The downgrade to Ba2 reflects the city’s poor fiscal management, modestly sized tax base, high tax rate, weak socioeconomic profile, and an above average debt burden.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.85% | -8 | -20 |
| 5-year | 1.45% | -11 | -31 |
| 10-year | 2.04% | -8 | -23 |
| 30-year | 2.81% | -10 | -20 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.71% | -2 | -6 |
| 5-year | 1.07% | -1 | -19 |
| 10-year | 1.75% | 0 | -17 |
| 30-year | 2.70% | 0 | -12 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 86% |
| 30-year AAA Municipal vs. Treasury | 96% |
| High-Yield Municipal vs. High-Yield Corporate | 70% |
Further Reading
How to Choose the Right Muni Bond Ladder Fund provides guidelines for purchasing different municipal bond ladder funds.
