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 declined last week, whereas muni bond yields were stable for those with a lower maturity, but declined for higher maturities.
- There was a notable upgrade for the Ontario, OH’s GOLT Bonds rating by Moody’s, the details of which are provided below.
- We also provide a quick update on Puerto Rico’s bond market.
Full-Week Bond Market Summary for Sep 19-23
- Treasury yields declined last week, led by the 30-year maturity.
- Last week’s Fed meeting provided updated projections for the probability of the next interest rate hike.
- Muni bond market was quiet and fairly stable for lower maturities.
- A federal panel group is set to oversee Puerto Rico’s debt restructuring soon.
Detailed Report
- Treasury yields declined last week in response to the dovish monetary policy announced by the Federal Reserves in last Wednesday’s meeting.
- As a result, the 30-year maturity Treasury yield went down by 10 bps.
- Global sovereign yields declined as well, due to the central bank’s policy announcement by the Bank of Japan.
- The Fed publicized that they won’t increase interest rates until further signs of progress towards inflation and employment are realised.
- Awaiting the Fed’s decision, the muni bond market in general was quiet last week.
- The muni bond yield for lower maturities was pretty stable, whereas it declined for higher maturities – as the yield curve steepened.
- The 2-year muni yield increased by 5 bps, whereas the 10-year muni yield declined by 5 bps.
- Muni supply of $8.5B was well received last week.
- This week’s new issuance supply is expected to be at $9B.
- Fund flows were positive for the 51st consecutive week, at $518M.
- High yield muni bond new issuance is expected to be minimal again this week.
- A federal panel assigned by President Barack Obama to resolve the island territory’s debt crisis plans to meet for the first time on Sep 30, 2016 to select a chairperson and then begin its work.
- The board is set to meet in mid-October and again in Puerto Rico in mid-November to discuss further debt restructuring and payment due plans.
Moody’s Upgrade
Ontario, OH’s GOLT:
Moody’s Investors Service has upgraded to Aa3 from A1 the rating on Ontario, OH’s outstanding GOLT. It reflects the city’s robust reserve position – which has grown considerably over the last five years – and its strong tax base. Expansion of the local economy and tax base, and improvements to residents’ income levels can lead to a further upgrade of the bond.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.76% | -1 | -5 |
| 5-year | 1.16% | -4 | -4 |
| 10-year | 1.62% | -7 | 4 |
| 30-year | 2.35% | -10 | 12 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.80% | 5 | 19 |
| 5-year | 1.04% | 0 | 18 |
| 10-year | 1.52% | -5 | 10 |
| 30-year | 2.30% | -1 | 18 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 94% |
| 30-year AAA Municipal vs Treasury | 98% |
| High Yield Municipal vs High Yield Corporate | 82% |
Are Muni Bonds as Safe as They Seem? article looks at various risk factors associated with municipal bonds, and explain how investors can avoid problematic muni bonds while properly positioning their portfolio.
