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 fell last week, led by 10-year maturity.
- There was a notable upgrade for the White Plains City School District, NY’s GOLT Bonds rating by Moody’s, the details of which are provided below.
Full-Week Bond Market Summary for July 25-29
- Treasury yields fell last week, led by 10-year maturity.
- Muni bond prices rose for all the maturities as their yields went down.
- The Fed meeting failed to hint anything about a rate hike.
- Positive muni fund flow continues for the 43rd week.
Detailed Report
- Shorter maturity yields rose earlier in the last week, but all maturities tripled down by the end of the week after the Fed’s meeting.
- Decline in Treasury and muni yields was also caused by announcement of II Quarter GDP, which came in lower than expected.
- This affected longer maturity yields more than shorter ones.
- The Fed meeting, which took place last Wednesday, didn’t reveal any hints about a rate hike in the next couple of months.
- Muni bond yields declined last week, with 2- and 10-year declining by 5-bps.
- New issue supply of $8.8B was easily absorbed last week.
- At $658M, muni fund flow was positive last week for the consecutive 43rd week.
- High yield muni flow totaled $206M last week.
- Fund flow total $7.5B year-to-date.
- This week’s new issuance is expected to be at $12.1B.
- Credit spread contracted more in July, as high-yield muni yields failed to follow high-grade muni and Treasury yields.
- There was no major update on the Puerto Rico bond market last week.
Moody’s Upgrade/Downgrade
Upgrades:
White Plains City School District, NY’s GOLT:
Moody’s Investors Service has upgraded the rating on White Plains City School District, NY’s GOLT debt to Aa1 from Aa2. It reflects the district’s large tax base, strong socioeconomic profile and consistent General Fund surpluses. Continuing growth in reserves and reduction in debt burden could lead to an upgrade in rating.
Downgrades:
Village of Oak Park’s IL’s GO:
Moody’s Investors Service has downgraded the Village of Oak Park’s IL’s GO rating to A1 from Aa3. It reflects the Village’s limited reserve position, tax base, affluent demographic profile and available liquidity. Sustained improvement in operating fund reserves and liquidity could lead to an upgrade in rating.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.66% | -5 | 7 |
| 5-year | 1.03% | -9 | 2 |
| 10-year | 1.45% | -11 | -2 |
| 30-year | 2.18% | -10 | -10 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.54% | -5 | -4 |
| 5-year | 0.87% | -1 | -2 |
| 10-year | 1.40% | -5 | 5 |
| 30-year | 2.12% | -3 | 10 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 96% |
| 30-year AAA Municipal vs Treasury | 97% |
| High Yield Municipal vs High Yield Corporate | 75% |
What Makes a Muni Bond ‘Undervalued’? article takes a look at what makes a muni bond ‘undervalued’ and how investors can mimic some of the same strategies used by fixed income professionals.
