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 and muni yields both declined across the curve last week, driven by the Friday’s payroll report.
There was a notable upgrade for the GO rating by Moody’s for the the Burlingame Elementary School District, CA, the details of which are provided below. We also provide a quick outlook on Puerto Rico’s bond market performance.
Full-Week Bond Market Summary for May 30 - June 03
- All the yield curves for treasuries and munis declined last week.
- 5- & 10-year treasury bonds had the highest yield declined as compared to 2- & 30-year bond.
- Bond market was driven by the sentiment about the payroll report released last week changes in the outlook for Fed policy.
- The U.S. House plans to vote next week on a proposal to address Puerto Rico’s debt crisis.
Detailed Report
- Treasury yields declined more than 10bps for all the maturities in response to the anticipated June rate hike.
- After the release of Friday’s payroll report the probability of the rate hike in June has diminished almost to 0%.
- 5- & 10-year bond yields declined the most by 15bps.
- Market still predicts high possibility for the July rate hike.
- Muni bonds delivered positive returns last week.
- Muni yields declined by only few bps in comparison to its treasury yields.
- New issuance of $4.5B was well received last week.
- New issuance for this week is expected as high as $13.7B.
- Fund flows were positive last week at $473 million.
- High yields muni spread widened last week as the riskier bonds lagged high grades.
- The U.S. House plans to vote next week on a proposal to address Puerto Rico’s debt crisis but it’s still vague if the plan will have full support to pass.
- If the bill can’t clear the House, it would leave Puerto Rico and its bondholders in the hurdle with no clear solution ahead for the island’s likely July 1 default on a $2B debt payment.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Burlingame Elementary School District’s, CA GO:
Moody’s Investors Service has assigned a Aa1 rating to Burlingame Elementary School District’s $14.4 million of 2016 General Obligation Refunding Bonds. The upgrade reflects the district’s continued healthy growth in assessed value, low yet consistent enrollment growth and a stable financial position supported by solid reserves and liquidity.
Downgrades:
Utica Community Schools, MI GOULT:
Moody’s Investors Service has downgraded to A2 from Aa2 the GOULT rating of Utica Community Schools, MI. The downgrade to A2 reflects the district’s narrowing reserves and liquidity which continues to be challenged by declining student enrollment and limited financial flexibility.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.77% | -14 | -11 |
| 5-year | 1.23% | -15 | -14 |
| 10-year | 1.70% | -15 | -15 |
| 30-year | 2.51% | -14 | -14 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.71% | -1 | -1 |
| 5-year | 1.06% | -3 | -3 |
| 10-year | 1.62% | -4 | -4 |
| 30-year | 2.40% | -5 | -5 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 95% |
| 30-year AAA Municipal vs Treasury | 95% |
| High Yield Municipal vs High Yield Corporate | 87% |
“How to Invest in U.S. City Bonds”: http://www.municipalbonds.com/news/2016/05/27/how-to-invest-in-u-s-city-bonds/ article illustrates reasons to invest in US city bonds.
