Full Week Bond Market Summary for Nov. 16 - Nov. 20:
• Last week US treasury yields were in a tight range without much movement, and continued to have low volatility.
• Municipal Bond yields also did not move much; it had a similar trend as the treasury yields.
• State tax revenues rose in Q2 2015 in comparison to last year.
• Puerto Rico planned to propose a universal debt exchange for various GO and sales tax revenue bonds. Total Return Index for Puerto Rico was -0.3% last week & -6.9% YTD.
Detail Report
Treasury yields did change a little last week, but the overall curve remained flat due to +6.6 bps change in 2 years maturity bond and an -3.8 bps change in 30 years maturity bond. Volatility of Treasury yields is now at the lowest level of 2015.
The probability of Fed Funds Rate hike in next month December is now 75% as per the market feedback. Yields might rise more if Fed Funds Rate hikes more in coming future. Due to very little belief in strong global economic growth and significantly rising inflation, long end yields are comparatively down. It seems as though at least volatility will revert to higher levels as the December FOMC meeting approaches.
Municipal yields had almost similar trend as the treasury yields, but had even less magnitude of adjustments than treasury. The AAA rated-GO Ratio fell once again. Municipal bond funds reported net inflows of approximately $385 million for the seventh consecutive week. Bloomberg 30-Day Supply has come off in this short week to $9.6 billion from $15.2 billion, in comparison to this time last week.
Treasury Notes Yield Report:
| Year | Yield | +/- BPS |
|---|---|---|
| 2 | 0.91% | +6.60 |
| 5 | 1.69% | +2.80 |
| 10 | 2.26% | -0.10 |
| 30 | 3.02% | -3.80 |
Municipal Index Curve Yields:
Bloomberg Municipal Index curve yields were lower.
The Ratio of 10-year AAA GO debt to 10-year Treasury yields fell to 93.9 on Friday from the previous Friday’s ratio of 97.6. The year-to-date average is 102.0 and the 12-month average is 101.5.
AAA Rated Go Bonds Yields:
| Year | Yield | +/- BPS |
|---|---|---|
| 2 | 0.67% | +2.00 |
| 5 | 1.33% | -2.00 |
| 10 | 2.12% | -9.00 |
| 30 | 3.18% | -1.00 |
Bond Buyer Indexes:
| Index | Yield % | 1 Week | +/- BPS | 1 Month | +/- BPS |
|---|---|---|---|---|---|
| Bond Buyer 20 Go Index | 3.65% | 3.74% | -9.00 | 3.68% | -3.00 |
| Bond Buyer 11 GO Index | 3.16% | 3.26% | -10.00 | 3.19% | -3.00 |
| Bond Buyer 25 Revenue Index | 4.04% | 4.13% | -9.00 | 4.07% | -3.00 |
AAA Muni Ratios and Spreads by Maturity:
| November 23, 2015 | Yield To Maturity | 0% Tax Rate | 35% Tax Equivalent | |||
|---|---|---|---|---|---|---|
| Maturity | AAA GO | Treasury | Spread | Ratio | Spread | Ratio |
| 1 | 0.38 | 0.48 | -9.9 | 79.3 | 10.5 | 121.9 |
| 2 | 0.67 | 0.94 | -26.8 | 71.4 | 9.3 | 109.9 |
| 3 | 0.92 | 1.27 | -34.7 | 72.7 | 15.0 | 111.8 |
| 4 | 1.14 | 1.54 | -39.3 | 74.4 | 22.3 | 114.5 |
| 5 | 1.34 | 1.73 | -39.0 | 77.4 | 33.0 | 119.1 |
| 7 | 1.68 | 2.07 | -38.7 | 81.3 | 51.8 | 125.0 |
| 10 | 2.13 | 2.29 | -16.7 | 92.7 | 97.7 | 142.6 |
| 15 | 2.58 | 2.56 | 2.0 | 100.8 | 140.7 | 155.0 |
| 20 | 2.87 | 2.71 | 15.8 | 105.8 | 170.3 | 162.8 |
| 25 | 3.11 | 2.88 | 22.9 | 107.9 | 190.1 | 166.1 |
| 30 | 3.18 | 3.04 | 14.2 | 104.7 | 185.5 | 161.0 |
Puerto Rico
• The S&P Municipal Bond Puerto Rico Index finished at 158.6 on Friday.
• Puerto Rico planned to present a universal debt exchange proposal, which will allow the exchange for a single new bonds to bondholders of various GO and sales tax bonds.
• Puerto Rico Highway Agency bought back $155 million of outstanding debt, whereas Ambac Assurance Corp. saw decline by $228.5 million.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Healdsburg Unified School District, CA’s GO Bonds:
Moody’s Investors Service has upgraded to Aa2 the Healdsburg Unified School District, CA’s general obligation (GO) bonds, and assigned an Aa2 rating to the current $11 million Election of 2012, Series C issuance. This upgrade reflects the sustained strengthening of the district’s financial position.
Downgrades:
Liberty County, (TX) GOLT bonds:
Moody’s Investors Service has downgrade, to Aa3 from Aa2, the general obligation limited tax (GOLT) rating on Liberty County’s (TX). This rating reflects the county’s structurally imbalanced operations. This has caused operating deficits and has drawn on reserves.
More Articles to Read
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