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 yield curves rose again last week; five- and 10-year Treasury bonds saw higher gains in yield than other maturities.
There was a notable upgrade to Rotterdam-Mohonasen Central School District, NY’s GO bond 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 February 29 - March 4
- Treasury yield curves rose last week.
- The Fed revised its estimate for first-quarter GDP from 1.9% to 2.2%.
- High-yield muni bonds outperformed low-yield bonds once again last week.
- Administration officials are warning of a humanitarian crisis if Congress does not move to address Puerto Rico’s debt crisis.
Detailed Report
- Strength in economic data and the increase in oil prices put upward pressure on the entire yield curve.
- The increase in yields was the largest for most maturities since November.
- Yields rose the most on Tuesday in response to the expected manufacturing data.
- The high-yield sector delivered the strongest relative performance as spreads tightened.
- The Fed revised its estimate for first-quarter GDP to 2.2% from 1.9%. The firmer economic data increases the likelihood that the Fed will raise rates later this year.
- Muni bonds followed the same trends as Treasuries last week.
- Five- and 10-year maturity muni bonds outperformed and increased more than other maturities.
- Last week’s new issue calendar was $10.8 billion.
- This week’s new issue calendar is expected to be approximately $8.5 billion.
- High-yield municipal bond fund flows eased last week at just $27 million.
- Credit spreads have contracted 27 basis points (bps) in the last three weeks.
- Puerto Rico is not only unable to make debt service payments on about $70 billion in debt, but is struggling to fund public safety, health and education.
- Administration officials are warning of a humanitarian crisis if Congress does not move to address Puerto Rico’s debt crisis.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Rotterdam-Mohonasen Central School District, NY’s GO:
Moody’s has upgraded the underlying rating on the district’s $6.6 million general obligation (GO) debt outstanding to Aa3 from A1. The underlying rating upgrade to Aa3 reflects the district’s improved financial position resulting from conservative budget management and incorporates the district’s stable and moderately sized tax base, above-average resident wealth levels, and elevated, but manageable, debt burden.
Downgrades:
Milwaukee Public Schools, WI’s Refunding Revenue Bonds:
Moody’s Investors Service has downgraded the rating on Milwaukee Public Schools, WI’s Refunding Revenue Bonds, Series 2007A to A1 from Aa3. The downgrade to A1 reflects an analysis of the link between the repayment of the bonds and the credit quality of the State of Wisconsin, which carries a general obligation (GO) rating of Aa2.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.86% | 7 | 9 |
| 5-year | 1.38% | 13 | 16 |
| 10-year | 1.88% | 11 | 14 |
| 30-year | 2.70% | 6 | 8 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.61% | 7 | 7 |
| 5-year | 1.08% | 15 | 15 |
| 10-year | 1.90% | 14 | 14 |
| 30-year | 2.90% | 10 | 10 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 101% |
| 30-year AAA Municipal vs. Treasury | 107% |
| High-Yield Municipal vs. High-Yield Corporate | 78% |
Are Muni Bonds Vulnerable to Energy Markets? provides insight into how the dramatic decline in the U.S. energy industry could have an impact on muni bonds.
