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.
- 5-, 10-, and 30-year Treasury and muni yields both declined last week.
- Moody’s notably upgraded the City of Sachse’s TX GOLT Bonds rating, the details of which are provided below.
- We also provide a quick outlook on Puerto Rico’s bond market performance.
Full-Week Bond Market Summary for July 4-8
- 5-, 10-, and 30-year Treasury yields declined for the sixth consecutive week.
- June employment results turned out to be stronger than expected.
- 2-year muni yields remained unchanged while the yield for other maturities declined.
- Puerto Rico still needs to tackle its issues for the territory’s long-term health.
Detailed Report
- Last week, Treasury yields declined for the sixth consecutive week, except for the 2-year maturity yield.
- 10-year Treasury yields were at a record low but still higher than many European 1-year sovereign yields, which are negative.
- The June employment report turned out better than expected, unlike the May report.
- 287,000 jobs were created in June as per the Bureau of Labor Statistics’ jobs report.
- But even this good news doesn’t change the Fed’s dovish tone. The Fed plans to continue its gradual pace of policy normalization before enacting another rate hike.
- The 2-year muni yield remained unchanged, while the yield for other maturities declined, but less than their Treasury counterparts.
- Because last week was a holiday week, a new issue supply of $1.4 billion was absorbed.
- This week’s new issue is expected to be at $9 billion.
- The high yield muni fund flow year-to-date totaled $6.68 billion.
- Traditional high yield muni bonds declined, narrowing credit spreads, but they still remain attractive to muni investors.
- Last week, President Barack Obama signed the PROMESA legislation for Puerto Rico’s debt crisis resolution.
- But the island territory still needs to resolve issues such as shipping reform, electric power regulation, municipal consolidation, and privatization of government corporations in order to obtain long-term growth and prosperity.
Moody’s Upgrade/Downgrade
Upgrades:
City of Sachse’s, TX GOLT :
Moody’s Investors Service has upgraded its rating on the City of Sachse’s, TX GOLT debt to Aa2 from Aa3. The upgrade reflects a strong tax based mainly driven by residential development, healthy reserves, and above-average socioeconomic life. Continued financial performance and an increase in healthy reserves may lead to an upgrade of this bond.
Downgrades:
Galesburg-Augusta Community School District, MI, GO:
Moody’s Investors Service has downgraded to A2 from A1 the GO rating of Galesburg-Augusta Community Schools, Michigan. The downgrade reflects the district’s debt burden, sliding financial position, and decline in long-term revenue growth. Material improvement in the district’s reserves and liquidity may improve its current conditions.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.61% | 2 | 2 |
| 5-year | 0.95% | -5 | -5 |
| 10-year | 1.36% | -9 | -11 |
| 30-year | 2.10% | -13 | -19 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.59% | 0 | 1 |
| 5-year | 0.86% | -3 | -3 |
| 10-year | 1.31% | -3 | -4 |
| 30-year | 1.95% | -4 | -7 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 96% |
| 30-year AAA Municipal vs Treasury | 92% |
| High Yield Municipal vs High Yield Corporate | 82% |
The What Puerto Rico’s Default Means for Muni Investors article illustrates what the default means for Puerto Rican bondholders and the wider municipal bond market.
