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 fell last week led by the 2-year maturity, whereas muni bond yields rose up with shorter maturities leading up more than longer ones.
- There was a notable upgrade for the City of Seabrook, TX’s GOLT Bonds rating by Moody’s, the details of which are provided below.
- We also provide a quick update on the Puerto Rican bond market.
Full-Week Bond Market Summary for Aug 29 - Sep 02
- Treasury yields declined the most on Monday.
- Unlike treasury yields, muni bond yields managed to rise up.
- Probability of September rate hike declined.
- Puerto Rico failed to make bond interest payment of $9.9M.
Detailed Report
- Treasury yields were driven by Monday’s decline last week, which caused them to fall.
- Market predicts that the yield movements were mainly due to interpretation of how economic releases may affect the Fed’s decision to raise rates.
- Short-term maturity yields were driven the most, led by the 2-year maturity, which went down by 6 bps.
- Though the probability of a September rate hike has been declined, market is keeping track of economic releases that could affect the likelihood of an interest rate hike at the Fed meeting on Sep 21, 2016.
- Muni bond yields reacted in the opposite direction to that of Treasury yields.
- Muni bond yields rose up, led by the 2-year maturity, which went up by 14 bps.
- Last week, the market absorbed the new issuance of $7.1B.
- Fund flows were positive for the 48th consecutive week.
- This week’s new issue supply is expected to be at $5.4B due to the holiday shortened week.
- High yield muni bond fund flow was $30M last week.
- The island territory failed to pay bond investors $9.9M of interest, which was due September 1, 2016.
- Failed payment was disclosed in a filing on the Municipal Securities Rulemaking Board’s website called EMMA.
Moody’s Upgrade/Downgrade
Upgrades:
City of Seabrook, TX’s GOLT:
Moody’s Investors Service has upgraded the City of Seabrook, TX’s GOLT bond rating to Aa3 from A1. It reflects the city’s healthy reserves due to conservative budgeting and strong tax base growth. Continuation in tax-base expansion and reduction in debt burden could lead to an upgrade of the bond.
Downgrades:
City of Evanston, IL’s GO:
Moody’s Investors Service has downgraded the City of Evanston, IL’s GO to Aa2 from Aa1. Ratings reflect the multi-year erosion in city reserves and growing unfunded pension liabilities. Reduction in the city’s debt and pension burden could lead to an upgrade in the rating.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.79% | -6 | 15 |
| 5-year | 1.19% | -5 | 17 |
| 10-year | 1.60% | -3 | 13 |
| 30-year | 2.28% | -1 | 5 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.69% | 14 | -9 |
| 5-year | 0.91% | 5 | -2 |
| 10-year | 1.45% | 3 | -2 |
| 30-year | 2.14% | 2 | 0 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 91% |
| 30-year AAA Municipal vs Treasury | 94% |
| High Yield Municipal vs High Yield Corporate | 82% |
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