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 on all maturities rose notably last week as compared to muni bond yields.
There was a notable upgrade for the City of Odessa, Texas’ GOLT 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 April 18-22
- Maturities of five years or more rose more than 10 basis points last week.
- Fixed-income prices in general sold off across the board last week.
- Demand for high-yield muni bonds continues to strengthen.
- New issuances might work as a buffer for muni yields to move higher.
- A Federal judge seized Puerto Rico government funds.
Detailed Report
- All U.S. Treasury yields rose last week; the 30-year maturity rose 15 basis points.
- Maturities of five years or more closed about six basis points higher on Wednesday as equity and oil prices rallied the most on that day.
- The performance of the credit-related sector remains strong.
- The increase in Treasury yields last week was supported by higher prices in equities and oil.
- Though there is no policy action expected at the Fed meeting this week, fear persists in the market that the Fed’s tone could cause rates to spike.
- With the exception of the two-year maturity, all muni yields rose last week; however, the increase was still less than Treasury yields.
- 30-year maturity muni bonds closed at 2.6% with six basis points last week.
- Muni bonds saw a new issue supply of $7.7 billion last week.
- Municipal fund flows remained positive for the 29th consecutive week at $555 million.
- This week’s new issue calendar is expected to come in at $8.3 billion.
- Despite the sell-off in muni bonds, its tone in the market remains constructive.
- On Friday, Puerto Rico’s government was ordered by a federal judge to immediately pay long-overdue bills owed by the Health Department to companies that serve individuals with developmental disabilities in the U.S.
- Congress has delayed action on a Puerto Rico debt restructuring bill that is being rewritten after it was short of votes last week.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Belmont County, OH’s GOLT:
Moody’s Investors Service has upgraded the rating on Belmont County, OH’s general obligation limited tax debt to Aa3 from A1. The upgrade to Aa3 reflects the county’s growing tax base and strong sales tax revenue trends, resulting in healthy reserve levels. The rating also incorporates the county’s economic concentration in the energy sector, below-average income indexes, moderate debt burden, and exposure to unfunded pension liabilities associated with state cost-sharing retirement plans.
Downgrades:
City of Odessa, Texas’ GOLT:
Moody’s Investors Service has downgraded the City of Odessa, Texas’ GOLT bonds to Aa3 from Aa2. The downgrade to Aa3 reflects the economy’s high concentration in the oil and gas sector, which has experienced a dramatic decline over the past 18 months, and which is unlikely to recover to pre-decline levels over the near term. The effects of the low oil price environment and industry uncertainty will challenge the city’s ability to balance its financial operations over time given the city’s significant reliance on economically sensitive sales tax revenues.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.82% | 8 | 10 |
| 5-year | 1.36% | 14 | 15 |
| 10-year | 1.89% | 14 | 12 |
| 30-year | 2.71% | 15 | 10 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.64% | -1 | -3 |
| 5-year | 1.00% | 1 | -7 |
| 10-year | 1.65% | 4 | -5 |
| 30-year | 2.60% | 6 | -9 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 87% |
| 30-year AAA Municipal vs. Treasury | 96% |
| High-Yield Municipal vs. High-Yield Corporate | 87% |
Mind the Difference Between Tax Efficiency & After-Tax Returns takes a closer look at the difference between tax-efficiency and after-tax returns in muni bonds.
