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.
Five-year maturity Treasuries rose the most again last week, whereas 10 and 30-year muni bonds decreased by a couple of basis points.
There was a notable upgrade for El Monte Union High School District, CA’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 March 7-11
- The Treasury yield curve rose last week due to global monetary policy shifts.
- No surprise elements are expected at this week’s Fed meeting.
- Municipal yields remained mostly unchanged.
- Low-year maturities muni bonds performed better than high-year maturities.
- Democrats released their version of a plan to tackle Puerto Rico’s growing debt crisis.
Detailed Report
- Once again, the five-year Treasury rose the most across the curve last week, especially on Thursday in response to the ECB’s announcement regarding easing policies.
- Momentum in Treasuries last week was caused by global monetary policy shifts and an increase in oil prices.
- With the Fed adopting a gradual path of policy normalization, we don’t expect any surprises this week at the Fed’s meeting.
- Muni bond yields didn’t see any major momentum last week.
- Two- and five-year muni bonds increased by 300 basis points, while 10- and 30-year muni bonds declined 100 and 400 basis points, respectively.
- New issuance was substantial last week at $10.5 billion.
- High-yield municipal bond fund inflows are averaging a solid $216 million per week year to date.
- The high-yield municipal new issue calendar for this week continues to reflect the longer-term trend of light issuance.
- On Monday, Senate Democrats, led by Robert Menendez of New Jersey, released their version of a plan to tackle Puerto Rico’s growing debt crisis, which was rejected by Senate Finance Chairman Orrin Hatch on late Monday.
- The Treasury department wants Congress to act urgently on restructuring Puerto Rico’s debt crisis.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
El Monte Union High School District, CA’s GO:
Moody’s Investors Service has assigned an Aa3 rating to El Monte Union High School District, CA’s general obligation bonds. The upgrade to Aa3 reflects the continued improvement in the district’s tax base, the expectation for continued tax base growth for the next two to three years, the expectation for stable reserves at levels healthy for the Aa3 rating category after two fiscal years of healthy operating surpluses, and expectations for continued operating surpluses in fiscal 2016 and fiscal 2017.
Downgrades:
City of Circleville, OH’s GOLT:
Moody’s Investors Service has downgraded the City of Circleville, OH’s general obligation limited tax (GOLT) rating to A1 from Aa3. The A1 rating reflects the city’s modestly sized tax base located in south-central Ohio and below-average socioeconomic characteristics, satisfactory operating reserves with a reliance on economically sensitive income taxes for operating revenues, a moderate debt profile with above-average principal amortization, and elevated pension liabilities associated with underfunded statewide plans.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.96% | 9 | 18 |
| 5-year | 1.49% | 12 | 28 |
| 10-year | 1.99% | 11 | 25 |
| 30-year | 2.75% | 6 | 14 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.64% | 3 | 10 |
| 5-year | 1.11% | 3 | 18 |
| 10-year | 1.89% | -1 | 13 |
| 30-year | 2.86% | -4 | 6 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 95% |
| 30-year AAA Municipal vs. Treasury | 104% |
| High-Yield Municipal vs. High-Yield Corporate | 80% |
What Are Green Muni Bonds? discusses the market for green muni bonds and why investors may want to consider adding them to their portfolio.
