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 rose across the curve last week.
There was a notable upgrade for the city of Midland’s (TX) GOLT bond 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 April 11-15
- The five-year maturity Treasury rose the most last week.
- Yesterday, the oil market recouped heavy losses spurred by the failure of major crude producers to agree to curbs on output that could have firmed up the market.
- Muni-bond yields changed only slightly last week.
- House Republicans will try to chart a path forward on legislation to help resolve Puerto Rico’s debt crisis.
Detailed Report
- All U.S. Treasury yields rose last week; the five-year maturity rose six basis points.
- Yields rose the most on Tuesday, with all rates increasing sharply as the price of oil reached a year-to-date high.
- The normalization policy adopted by the Fed is expected to push shorter-term rates higher.
- No surprise factor is expected at next week’s Fed meeting.
- Market expectations show that the next rate hike is not anticipated until the December meeting.
- Five- and 10-year muni bonds saw a change of two basis points, whereas other yields remained unchanged.
- The new issue supply came in at $7.2 billion and was absorbed by the market.
- This week’s new issue calendar is $7.8 billion.
- For the sixth consecutive week, high-yield munis declined last week.
- Consistent inflows continue to benefit high-yield municipals and this trend is expected to continue.
- Muni bonds continue to show positive vibes in the current market.
- House Republicans are trying to rework legislation to address Puerto Rico’s debt crisis amid a looming May 1 default that could roil financial markets.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
Oak Park School District, MI’s GOULT:
Moody’s Investors Service has upgraded the underlying rating on Oak Park School District, MI’s general obligation unlimited tax (GOULT) debt to A3 from Baa2. The upgrade to A3 reflects the district’s significantly improved financial position supported by positive enrollment trends.
Downgrades:
City of Midland’s (TX) GOLT:
Moody’s Investors Service has downgraded the rating of the city of Midland’s (TX) GOLT bonds to Aa2 from Aa1. The downgrade to Aa2 reflects the city’s high concentration in the oil and gas sector, which has experienced a dramatic decline over the past 18 months, and which is unlikely to recover to pre-decline levels over the near term. The effects of the low oil price environment will challenge the city’s ability to balance its financial operations given the city’s significant reliance on economically sensitive sales tax revenues.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.74% | 4 | 1 |
| 5-year | 1.21% | 6 | 1 |
| 10-year | 1.75% | 4 | -2 |
| 30-year | 2.56% | 1 | -5 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.65% | 0 | -2 |
| 5-year | 0.99% | 2 | -8 |
| 10-year | 1.61% | 2 | -9 |
| 30-year | 2.54% | 0 | -15 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs. Treasury | 91% |
| 30-year AAA Municipal vs. Treasury | 99% |
| High-Yield Municipal vs. High-Yield Corporate | 82% |
Muni Fraud: How Cities & Banks Defraud Investors illustrates a recent example of fraud in the municipal bond market and what it means for investors holding these bonds.
