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 for maturities less than 10 years declined last week, whereas muni bond yields surged up.
- There was no notable upgrade rating by Moody’s.
- We provide a quick update on Puerto Rico’s bond market.
Full-Week Bond Market Summary for Sep 12-16
- Treasury curve steepened last week, as yields for less-than-10-year maturities declined.
- All muni bonds maturity yields surged up.
- No monetary policy change expected for this week’s Fed meeting.
- The new federal law that protects Puerto Rico from bondholder lawsuits will have its day in court this week.
Detailed Report
- As the September interest rate hike diminished, shorter-maturity Treasury bond yields declined last week.
- 30-year maturity Treasury yield grew by 5 bps.
- The yield curve shift was mainly driven by the perceived news of economic releases, such as retail sales, CPI data and concerns over easing monetary policies.
- Market does not expect an interest rate hike to be announced in this week’s Fed meeting and, hence, less volatility can be expected.
- Muni bond yields for all maturities surged up last week, led by the 30-year maturity, which was up by 11 bps.
- Fund flows were positive for the 50th consecutive week, at $485 million.
- The new issue supply of $13.5B was well received last week.
- This week’s new issuance supply is expected to be as high as $9.6B.
- High-yield muni bond flow for the last week was $175M.
- The new federal law that protects Puerto Rico from bondholder lawsuits will have its day in court this week on September 22.
- A decision will be made whether investors should be temporarily blocked from suing over Puerto Rico’s debt defaults, since Congress extended protection through legislation enacted in June 2016 to resolve the island’s $70M debt crisis.
Moody’s Downgrade
Downgrades:
City of Moline, IL, GOULT:
Moody’s Investors Service has downgraded the City of Moline, IL GOULT rating to Aa3 from Aa2. It reflects the city’s high and growing long-term liabilities, underfunded pensions, moderately sized and stable tax base and below average resident income indices. Sustained economic expansion and improvement in the local socioeconomic profile moderation of the city’s high debt and pension burdens could lead to an upgrade in the rating.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.76% | -2 | -4 |
| 5-year | 1.20% | -2 | 0 |
| 10-year | 1.69% | 2 | 11 |
| 30-year | 2.45% | 5 | 21 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.75% | 5 | 14 |
| 5-year | 1.04% | 6 | 18 |
| 10-year | 1.57% | 8 | 15 |
| 30-year | 2.31% | 11 | 19 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 92% |
| 30-year AAA Municipal vs Treasury | 95% |
| High Yield Municipal vs High Yield Corporate | 80% |
Why Muni Investors Prefer Active Over Passive article shows why actively managed muni bond funds have succeeded in attracting capital, and whether investors should reassess their portfolios.
