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 as well as muni yields declined last week, except the 2-year muni bond yield remained unchanged.
- There was a notable upgrade for the West Whiteland Township, PA’s GO Bonds rating by Moody’s, the details of which are provided below.
- We also provide a quick summary on the Puerto Rico bond market.
Full-Week Bond Market Summary for Aug 8-12
- Treasury yields fell last week, led by 30-year maturity.
- Muni bond yields declined, but less than its comparative Treasury yields.
- Strong US GDP forecast predicted for 2016, Q3.
- Puerto Rico delays $252M tax refunds.
Detailed Report
- The BOE intended to purchase over £1 billion of long-dated government debt, but fell £52 million short of its target, causing bond yields to fall through major global indexes.
- As a result, US Treasury yields declined, which was led by 30-year maturity.
- Though the July retail sales report was published weaker than expected, a strong rebound for US GDP 2016, Q3 predictions remains intact.
- Market probability for a rate hike in 2016 has almost vanished with the US presidential election coming up in November.
- Muni bond yields fell by few bps, except the 2-year muni yield.
- The 2-year muni bond yield remained unchanged by end of the Friday.
- New issue supply of $7.8B was well absorbed.
- This week new issuance is expected to be at $5.4B.
- High yield muni fund flow increased last week by adding an additional $287M to the year-to-date total of $8.1B
- Puerto Rico’s Treasury Department confirmed that the island territory is holding up $252M worth of tax refunds because it is short on cash in the middle of the economic crisis it has been facing this year.
Moody’s Upgrade/Downgrade
Upgrades:
West Whiteland Township, PA’s GO:
Moody’s Investors Service has upgraded West Whiteland Township, PA’s GO Bonds to Aaa from Aa1. It reflects the township’s wealthy and primarily residential and commercial base, healthy reserve position, and low debt.
Downgrades:
City of Newton, IA’s GOULT:
Moody’s Investors Service has downgraded City of Newton, IA’s GOULT debt to A1 from Aa3. It reflects the city’s moderately sized tax base located near the Des Moines Metropolitan Area, moderate revenue raising flexibility and below-average socioeconomic profile. Significant expansion of the tax base and improvement of socioeconomic profile can lead to an upgrade of the bond ratings.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.71% | -2 | 5 |
| 5-year | 1.10% | -4 | 7 |
| 10-year | 1.51% | -8 | 6 |
| 30-year | 2.23% | -8 | 5 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.52% | 0 | 0 |
| 5-year | 0.85% | -1 | 1 |
| 10-year | 1.40% | -4 | 0 |
| 30-year | 2.13% | -4 | 1 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 93% |
| 30-year AAA Municipal vs Treasury | 95% |
| High Yield Municipal vs High Yield Corporate | 79% |
Why Muni CEFs May Offer the Best Bargains article provides insight on CEFs and why they might be an attractive bargain.
