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 declined last week, as did muni bonds, with the exception of the two-year maturity.
There was a notable upgrade for the city of Sanger, TX’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 May 2-6
- Yields on all Treasuries declined as a result of a drop in crude oil prices and the global equity market.
- The April employment report was weaker than expected.
- In response to the decline in yields, muni bond prices rose.
- High-yield muni bond fund flows slowed last week.
- U.S. Treasury Secretary Jacob Lew is heading to Puerto Rico on Monday to take stock of the island’s $70 billion debt crisis.
Detailed Report
- Treasury yields for all maturities declined again last week in response to a downturn in the overall market and a fall in crude oil prices.
- A weaker-than-expected April employment report was another fundamental factor for low rates.
- The drift in such short-term factors has kept the five-year maturity range volatile in the market for the last few weeks.
- The market expects a solid, fundamental environment for the credit sectors due to global monetary easing.
- The five-year muni bond remained unchanged last week, while other maturities declined following a steep slope.
- Last week’s new issuance of $8.5 billion was properly absorbed by the market.
- This week’s new issue calendar is expected to be $7.7 billion.
- High-yield municipal bond fund flows slowed last week to $132 million.
- Though yields declined for high-yield munis last week, spreads widened against the high grades.
- U.S. Treasury Secretary Jacob Lew is heading to Puerto Rico on Monday to see the effect of the island’s $70 billion debt crisis. His trip is part of the Obama administration’s campaign to pressure Congress to act.
- House Republicans are expected to announce new legislation this week in order to manage the island’s debt and restructuring.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Sanger, TX’s GO:
Moody’s Investors Service has assigned an A1 rating to the city of Sanger, TX’s GO Refunding Bonds, Series 2016. The upgrade to A1 reflects a growing yet modestly sized tax base favorably located near the Dallas/Fort Worth metro area, strengthening reserve levels, and a slightly elevated debt burden with rapid principal amortization.
Downgrades:
Auburn, NY’s GOLT:
Moody’s Investors Services has downgraded Auburn, NY’s GOLT rating to A2 from A1. The downgrade to A2 reflects an adequate financial position pressured by a sustained heavy debt burden with elevated fixed costs.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.74% | -5 | -5 |
| 5-year | 1.23% | -6 | -6 |
| 10-year | 1.78% | -5 | -5 |
| 30-year | 2.63% | -5 | -5 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.64% | 0 | -0 |
| 5-year | 0.95% | -3 | -3 |
| 10-year | 1.57% | -4 | -4 |
| 30-year | 2.49% | -9 | -9 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 88% |
| 30-year AAA Municipal vs. Treasury | 95% |
| High-Yield Municipal vs. High-Yield Corporate | 84% |
Are Muni Bond Ladders Right for You? provides some important considerations in determining if bond ladders are right for muni investors.
