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 and muni yields both rose across the curve last week, driven by the Fed speech for potential rate hike.
There was a notable upgrade for the City of Cranston, RI’s GO rating 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 May 16-20
- All the yield curves for treasuries and munis rose last week.
- 5 & 10-year bonds had the highest yield rally as compared to 2 & 30-year bond.
- Bond market was driven by the sentiment about the future Fed action.
- Sanders rejected the deal on Puerto Rico by calling it a concession to Wall Street.
Detailed Report
- Though treasury yields for all the maturities rose last week, the yield curve continue to flatten as shorter maturity yields increased more than the longer maturity yields.
- This was led by the market sentiment about the upcoming Fed action for June rate hike.
- The yield increase was led by 5-year maturities which still continues to be most sensitive to the changes.
- March minutes and Fed speech indicates a possibility for a June hike by more than 25bps.
- The muni bond market outperformed treasury sell-off last week.
- New issuance of $11B was received.
- This week’s new issue calendar is $7.8B.
- High yield municipal bond funds saw inflows of $372M last week while investors have added $1.1B in the last four weeks.
- Democratic presidential candidate and U.S. Senator Bernie Sanders on Monday rejected a bipartisan deal reached in the House of Representatives on legislation to address Puerto Rico’s debt crisis, calling it a concession to Wall Street and proposed to allow the island territory the same access to restructure its debt in bankruptcy court that is afforded to municipalities.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
- City of Cranston, RI’s GO:*
Moody’s Investors Service has upgraded to A1 from A2 the rating on the City of Cranston, RI’s GO debt. The A1 rating reflects the sizeable and diverse tax base with above average demographics, improved financial position with adequate reserves, manageable debt burden, and large unfunded pension liability.
Downgrades:
Town of Ramapo, NY’s GO:
Moody’s Investors Service has downgraded the Town of Ramapo, NY’s GO debt to A3 from A1. The outlook reflects uncertainty around the eventual outcome of the federal charges. Downside risks could include an audit restatement or financial adjustments.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.88% | 13 | 9 |
| 5-year | 1.36% | 16 | 7 |
| 10-year | 1.84% | 14 | 0 |
| 30-year | 2.63% | 8 | -5 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.67% | 4 | 3 |
| 5-year | 1.02% | 9 | 4 |
| 10-year | 1.63% | 9 | 2 |
| 30-year | 2.43% | 1 | -15 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 88% |
| 30-year AAA Municipal vs Treasury | 92% |
| High Yield Municipal vs High Yield Corporate | 85% |
Not All GO Bonds Are Created Equal article describes various types of general obligation muni bonds and the details that bondholders should carefully consider prior to investing.
