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.
Except for the 30-year Treasury, all Treasuries rose across the curve last week. Muni bonds remained almost flat for the holiday-shortened week.
There was a notable upgrade for San Felipe Del Rio Consolidated Independent School District, TX’s GO 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 March 21-24
- The five-year Treasury led more than the other maturities.
- The market probabilities for an April or June interest rate hike remain low.
- High-yield municipal demand appears to be strengthening.
- House Republicans are preparing legislation to create a new oversight board that would help Puerto Rico control its finances.
Detailed Report
- Treasury yield movements were driven mainly by oil prices last week.
- All Treasury maturities rose last week with the exception of the 30-year bond.
- Comments from Fed officials about the imminence of the next rate hike pushed Treasury rates higher, but the market is figuring that the probability of an April or June rate hike is low.
- The increase in Treasury yields was led by the five-year Treasury, which has been the most sensitive to macroeconomic changes.
- Muni bond prices improved during the holiday-shortened week.
- Last week’s new issue supply of $6.3 billion was well received.
- Yields for high-yield bonds increased modestly last week.
- This week’s new issue supply is $6 billion.
- This week’s new issue calendar is producing a slight increase in the number of higher-yielding deals, but no deals are larger than $65 million.
- U.S. House Republicans are preparing legislation to create a new oversight board that would help Puerto Rico control its finances. The move is designed to deal with the territory’s $70 billion in debt.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
San Felipe Del Rio Consolidated Independent School District, TX’s GO:
Moody’s Investors Service has upgraded the underlying rating of San Felipe Del Rio Consolidated Independent School District, TX’s GO bonds to Aa3 from A1. The upgrade to Aa3 reflects the moderately sized and modestly growing tax base in the west central border region of Texas, the strong fiscal management and healthy financial position of the district, which is expected to continue despite plans to spend down the fund balance on capital projects, and the manageable net direct debt burden that is below the median for similarly rated Texas school districts.
Downgrades:
City of Waukesha, WI’s GO:
Moody’s Investors Service has downgraded the City of Waukesha, WI’s GO bond to Aa2 from Aa1. The downgrade of the city’s long-term rating to Aa2 reflects its relatively narrow reserve levels and challenging position of tax increments.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.87% | 3 | 10 |
| 5-year | 1.38% | 4 | 17 |
| 10-year | 1.90% | 3 | 17 |
| 30-year | 2.67% | 0 | 6 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.67% | 0 | 13 |
| 5-year | 1.12% | 0 | 19 |
| 10-year | 1.82% | -1 | 6 |
| 30-year | 2.76% | -3 | -4 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 95% |
| 30-year AAA Municipal vs. Treasury | 103% |
| High-Yield Municipal vs. High-Yield Corporate | 80% |
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