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 declined across the curve last week, driven by global government bond market.
There was a notable upgrade for the St. Charles Parish Hospital Service District’s, LA, Unlimited Tax Bonds 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 June 6 - 10
- All the yield curves for Treasuries and munis declined last week.
- 10- & 30-year muni bonds had the highest yield declined compared to the other maturities.
- Bond market was driven by global government bond market and to a certain extent by potential threat of Brexit.
- The Supreme Court on Monday struck down Puerto Rico’s debt-restructuring law.
Detailed Report
- 5-, 10- & 30-year Treasury yields declined by same bps i.e. 6bps.
- 10-year Treasury yield fell to its lowest point since May 2013.
- All the bond market yields were affected by global government bond market, expansion of ECB’s asset purchasing program and potential threat of Brexit.
- Fed chair Janet Yellen did not speak about any clues regarding rising rates last week.
- Gradual policy normalization is expected to support credit sectors.
- Long maturity muni bonds outperformed Treasury bonds last week.
- New issuance of $12.6 billion was readily absorbed.
- New issuance for this week is expected to be only $5.5 billion.
- High yield municipal fund flows totaled $470 million last week, which was the largest inflow in many years for muni bond market.
- The Supreme Court on Monday struck down Puerto Rico’s debt-restructuring law, which has increased pressure on Congress to finish work on pending legislation in order to resolve crisis.
Moody’s Upgrade/Downgrade Ratio
Upgrades:
St. Charles Parish Hospital Service District’s, LA, Unlimited Tax Bonds:
Moody’s Investors Service has upgraded to Baa3 from Ba1, the underlying rating on St. Charles Parish Hospital Service District’s, LA, Unlimited Tax Bonds. The rating reflects the district’s large and concentrated tax base that is expected to grow over the near to medium term and its manageable debt profile.
Downgrades:
State of Illinois’ GO:
Moody’s Investors Service has downgraded the State of Illinois’ GO rating to Baa2 from Baa1. The rating downgrade reflects continuing budget imbalance from addressing revenue lost due to income tax cuts that took effect in Jan 2015.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.73% | -5 | -15 |
| 5-year | 1.17% | -6 | -21 |
| 10-year | 1.64% | -6 | -21 |
| 30-year | 2.45% | -6 | -20 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.68% | -3 | -4 |
| 5-year | 1.00% | -6 | -9 |
| 10-year | 1.52% | -10 | -14 |
| 30-year | 2.22% | -18 | -23 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 93% |
| 30-year AAA Municipal vs Treasury | 91% |
| High Yield Municipal vs High Yield Corporate | 87% |
How Pension Liabilities Affect Munis article illustrates how pension liabilities impact municipal bonds & need for investors to consider it.
