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 curve remained flat for shorter maturities will decline for longer ones. Muni yields declined in an ascending order from shorter to longer maturities.
There was a notable upgrade for the Township of Lyndhurst, NJ’s GO rating 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 9-13
- Short term treasury remained flat whereas long term declined last week.
- Fed rate hike possibility remain high after Fed President Eric Rosengren’s remarks on last Thursday.
- Muni bond prices rose in an ascending order last week due to decline in its yields from lower to longer maturities.
- House panel delayed Puerto Rico’s action plan for a week.
Detailed Report
- Long term maturity treasury yields declined last week but still had second-highest investment grade issuance this year.
- High amount of issuance put pressure on treasury yields.
- Treasury yields moved in similar direction with the equity market last week.
- Increase in oil prices due to an unplanned supply outage in Canada as a result of wildfires in Fort Mcmurray and outage shutdown in Nigeria were the major driving factor for affecting the market.
- Though market hasn’t provided any confirm probability of the next rate hike but its possibility remains high after Fed President Eric Rosengren’s remarks on last Thursday.
- Muni bond prices rose again last week as yields declined.
- Muni yields declined in a sloping trend with shortest maturity of 2-year declined by 1bps to longest maturity of 30-year declined by 7bps.
- Last week market absorbed new issue supply of $8.2B.
- New issue supply is expected to reach as high as $11B this week.
- High yield muni funds added $309M last week in its fund inflow.
- Muni spreads are expected to get more compressed during summer time historically.
- House Republicans have pushed back their plans to advance a bill in order to address the Puerto Rico debt crisis and this could delay the solution until early June.
- While Puerto Rico faces a crucial payment deadline on July 1 for $2B of its debt load, it still remains unclear when can Congress will be able to get the measure to the president regarding this situation.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Township of Lyndhurst, NJ’s GO:
Moody’s Investors Service has upgraded the Township of Lyndhurst, NJ’s GO rating to A2 from Baa1. The upgrade to A2 reflects the township’s large tax base as well as its greatly improved financial position since settling a property tax dispute with a state agency.
Downgrades:
Seminole Hospital District, TX’s GOLT:
Moody’s Investors Service has downgraded to A3 from A1 the rating on Seminole Hospital District, TX’s GOLT bonds. The downgrade to A3 reflects the district’s economically concentrated tax base to oil and gas mineral values have declined due to recent turmoil going in oil market and based on preliminary assessments, it is expected to fall further in fiscal 2017.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.75% | 1 | -4 |
| 5-year | 1.21% | -2 | -9 |
| 10-year | 1.70% | -8 | -13 |
| 30-year | 2.55% | -8 | -13 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.63% | -1 | -1 |
| 5-year | 0.93% | -2 | -5 |
| 10-year | 1.54% | -3 | -7 |
| 30-year | 2.42% | -7 | -16 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 90% |
| 30-year AAA Municipal vs Treasury | 95% |
| High Yield Municipal vs High Yield Corporate | 85% |
Further Reading
Where Are the Opportunities in Today’s Muni Bond Market? shows where the muni bonds stands from investment opportunity in today’s market.
