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 bond yields rose last week for most of the maturities.
- There was a notable upgrade for the Carroll Independent School District’s, TX’s GO Bonds rating by Moody’s, the details of which are provided below.
- We also provide a quick update on Puerto Rico’s bond market.
Full-Week Bond Market Summary for Sep 05 - 09
- Yields declined sharply last Monday, before rising up for the rest of the week.
- Probability of a September interest rate hike remains low.
- Muni bonds prices closed lower last week, as yields went up.
- Puerto Rico’s bond market stabilized, after months of a troubled economy.
Detailed Report
- Decline in Treasury last Monday was due to the ISM non-manufacturing index disappointing market expectations.
- Yields rose each day after that – especially on Thursday and Friday when European Central Bank announced it wouldn’t expand its bond-buying program.
- Increase in Treasury yields was also driven by the high level of investment grade issuance.
- Probability of a September interest rate hike remains low, but Fed is committed to increase rates if economic data supports it.
- Muni bond yields went up as well last week led by the 5-year maturity, which increased by 7bps.
- Fund flows were positive for the 49th consecutive week at $986 million.
- Due to the holiday shortened week, new issue supply was only $4.8B.
- This week’s new issuance supply is expected to be as high as $12.5B.
- High-yield muni bond flow for the last week was $264M.
- Following the Labor Day holiday last week, high-yield muni bond yields and spreads increased.
- After months of a troubled economy and a default on debt for Puerto Rico, there was a wavering light on Puerto Rico’s bond market last week.
- The island’s bond market responded favorably to the White House appointment of a seven-member control board to oversee the its finances.
Moody’s Upgrade/Downgrade
Upgrades:
Carroll Independent School District’s, TX’s GO:
Moody’s Investors Service has upgraded Carroll Independent School District’s, TX’s GO bond rating to Aa1 from Aa2. Upgrade reflects the district’s trend of tax-base growth and healthy reserves. Substantial tax-base growth and moderation of debt burden could lead to a further upgrade in the ratings.
Downgrades:
There were no noticeable downgrades in muni bonds last week.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.78% | 0 | -2 |
| 5-year | 1.22% | 3 | 3 |
| 10-year | 1.68% | 7 | 10 |
| 30-year | 2.40% | 12 | 16 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.70% | 1 | 9 |
| 5-year | 0.98% | 7 | 12 |
| 10-year | 1.49% | 4 | 7 |
| 30-year | 2.20% | 6 | 8 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 89% |
| 30-year AAA Municipal vs Treasury | 92% |
| High Yield Municipal vs High Yield Corporate | 93% |
How Muni Losses Could Translate to Negative Taxes article looks at a lesser-known feature of municipal bond funds recently explored by Allan Roth that could lead to a negative tax rate in some cases.
