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 sharply last week, led by a 10-year Treasury maturity.
- There was a notable upgrade for the East Whittier School District’s GO Bonds rating by Moody’s, the details of which are provided below.
Full-Week Bond Market Summary for Aug 1-5
- Treasury yields rose last week, was led by a 10-year maturity.
- Muni bond yields were led by a 30-year maturity.
- Strong employment report for the month of July.
- Positive muni fund flow continues for the 44th week.
Detailed Report
- Stronger employment report for the month of July pushed Treasury yields higher last week.
- Spreads tightened and all sectors outperformed similar-duration Treasuries.
- Heavy volume of investment-grade corporate new issuance put upward pressure on rates.
- 10-year Treasury yield was up by 14 bps.
- Thought probability of a December hike remains below 50%, while a strong employment report increased the chance of a Fed rate hike in 2016.
- Muni bond yields for all the maturities increased as well, but less so compared to their counterpart Treasury yields.
- New issues supply of $11.7B was well received last week.
- This week’s new issue supply is expected to be at $8B.
- Fund inflows totaled $784M last week.
- High-yield muni yields increased last week, causing credit spread to widen by 2 bps on average.
- There was no major update on Puerto Rico’s bond market last week.
Moody’s Upgrade/Downgrade
Upgrades:
East Whittier School District’s GO:
Moody’s Investors Service has upgraded East Whittier School District’s GO Bonds to Aa3 from A1. It reflects the district’s sizeable tax base that is poised for additional moderate growth. Improvement in reserve position and significant growth in tax base could lead to an upgrade of the bond.
Downgrades:
City of West Haven, CT’s GO:
Moody’s Investors Service has downgraded to Baa2 from Baa1 the City of West Haven, CT’s GO outstanding rated debt. It reflects the continued negative general fund balance. A trend of balanced operations and positive general fund balance could lead to an upgrade of the bond.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.72% | 7 | 7 |
| 5-year | 1.14% | 11 | 11 |
| 10-year | 1.59% | 14 | 14 |
| 30-year | 2.31% | 13 | 13 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.52% | 0 | 0 |
| 5-year | 0.86% | 2 | 2 |
| 10-year | 1.44% | 4 | 4 |
| 30-year | 2.17% | 5 | 5 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 91% |
| 30-year AAA Municipal vs Treasury | 94% |
| High Yield Municipal vs High Yield Corporate | 75% |
Is the Muni Winning Streak Coming to an End? article shows whether the drop in muni bonds is a temporary blip on the radar or part of a larger trend moving into the second half of 2016.
