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 for all maturities experienced a downturn last week as a result of the domestic economy and the price of oil.
There was a notable upgrade for Hawaii Pacific Health by Moody’s, the details of which are provided below. Also, we provide a quick outlook on Puerto Rico’s bond market performance.
Full-Week Bond Market Summary for February 1-5
- Treasury yields for all maturities declined last week.
- Muni yields declined as well in the last week.
- The Fed is committed to continuing policy normalization.
- China’s foreign exchange reserves declined to $3.23 trillion.
- The U.S. House committee will hold a hearing regarding Puerto Rico on February 25, 2016.
Detailed Report
- U.S. treasury yields experienced a drastic downturn last week for all maturities, with 5- and 10-years falling drastically.
- The market is very volatile and sensitive even to trivial news. Concerns about tightening financial conditions and low inflation have contributed to lower market expectations for future Fed rate hikes.
- The market is skeptical of any interest rate hikes in the first half of 2016 due to the current sensitive economic circumstances.
- Muni bonds declined as well last week. The most dramatic rate movement was the sharp drop on Tuesday, when oil prices fell below $30 per barrel.
- The new issue market for muni bonds was $5.3 billion last week, with fund flows of $673 million.
- This week’s new issue calendar is higher than last week, at $8.8 billion.
- Last week saw 18 consecutive weeks of inflows into high-yield municipal bond funds, while year-to-date flows totalled $1.24 billion.
- China’s foreign exchange reserves shrank to $3.23 trillion last week, the lowest it’s been since 2012, indicating that the central bank sold dollars as the yuan’s retreat to a five-year low exacerbated depreciation pressure.
- The U.S. House Committee on Natural Resources is to hold a hearing on Puerto Rico on February 25, 2016, as Congress tries to come up with a solution for the debt-ridden territory.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Hawaii Pacific Health:
Moody’s Investors Service upgraded Hawaii Pacific Health’s (HPH) rating to A1 from A2.The upgrade to A1 reflects the maintenance of strong operating performance and the further improvement of balance sheet and debt measures, despite a major project underway.
Downgrades:
Ravenna, OH’s General Obligation:
Moody’s Investors Service has downgraded the rating of the City of Ravenna’s outstanding general obligation limited tax (GOLT) debt to Baa1 from A2. The city currently has $5.2 million of outstanding GOLT-rated debt. The downgrade to Baa1 reflects the weakening financial position of the city, its underlying economic weaknesses as indicated by its recent tax base devaluation, a low resident income profile, dependency on industrial manufacturing and production, and its high leverage in terms of both bonded debt and exposure to unfunded pension liabilities of two statewide, cost-sharing plans.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.72% | -5 | -5 |
| 5-year | 1.24% | -9 | -9 |
| 10-year | 1.84% | -9 | -9 |
| 30-year | 2.67% | -7 | -7 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.57% | -9 | -9 |
| 5-year | 0.89% | -11 | -11 |
| 10-year | 1.66% | -5 | -5 |
| 30-year | 2.72% | -3 | -3 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 89% |
| 30-year AAA Municipal vs. Treasury | 101% |
| High-Yield Municipal vs. High-Yield Corporate | 70% |
Further Reading
High Yield: Should You Buy Illinois Muni Bonds? provides insight into the state of Illinois’ financial situation and its high-yield investment bonds.
