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 yields, except for 2-year maturity, declined last week; whereas muni bond yields for 5- & 10-year maturities declined.
- There was a notable upgrade for the Manheim Township School District, PA’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 26-30
- Treasury yields declined last week, led by 30-year maturity.
- After September’s Fed meeting, the probability of an interest rate hike continued to float around.
- High yield muni bond increased a little last week.
- The powerful control board established to oversee a restructuring of Puerto Rico’s debt set a two-week deadline for the island to submit a turnaround plan.
Detailed Report
- Except for 2-year maturity, all Treasury yields declined last week
- Bond market was moved down by the fine imposed by the U.S. Department of Justice against Deutsche Bank last week.
- 30-year maturity Treasury yield went down by 3 bps.
- Yields later rose in the week on the two major news pieces: the OPEC agreement to limit oil production and the U.S. Department of Justice fine may be negotiated to $5.4B from $14B.
- The probability of a December interest rate hike has increased after the hawkish comments at September’s Fed meeting.
- The muni bond market moved sideways, with the no change in the interest rate for now announcement.
- 5- and 10-year maturity yields went down by 1 and 2 bps, respectively; whereas other maturities went up.
- Muni supply of $9.5B was well received last week.
- This week’s new issuance supply is expected to be as high, at $14.1B.
- Fund flows were positive for the 52nd consecutive week, at $664M.
- High yield muni bonds increased a little; hence, spreads were pushed higher.
- Control board established to oversee a restructuring of Puerto Rico’s $69B debt burden by October 14, as the deadline approaches to draw up plans to put the island territory on a sustainable fiscal path.
Moody’s Upgrade
Upgrades:
Manheim Township School District, PA’s GO:
Moody’s Investors Service has upgraded Manheim Township School District, PA’s GO Bonds, Series of 2016 rating to Aa2 from Aa3. It reflects the district’s sizeable and growing suburban tax base, and above-average wealth levels. Continued growth of the tax base and an increase in reserve levels could lead to a further upgrade in the future.
Downgrades:
Marshfield, WI’s GOULT:
Moody’s Investors Service has downgraded to Aa3 from Aa2 the rating on Marshfield, WI’s outstanding GOULT debt. It reflects gradual declines in the city’s cash and reserves, and an increased debt burden. Sustained growth of the city’s tax base, improvement in resident wealth indices and increases to operating reserves and liquidity could lead to an upgrade of the bond.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.76% | 1 | -4 |
| 5-year | 1.15% | -1 | -5 |
| 10-year | 1.60% | -2 | 1 |
| 30-year | 2.32% | -3 | 8 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.82% | 2 | 21 |
| 5-year | 1.02% | -2 | 16 |
| 10-year | 1.51% | -1 | 9 |
| 30-year | 2.31% | 1 | 19 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 94% |
| 30-year AAA Municipal vs Treasury | 100% |
| High Yield Municipal vs High Yield Corporate | 84% |
3 Tips for Choosing the Right Muni Bond Fund article covers some tips for investors looking to purchase muni bond ETFs, including tax implications, yield considerations and risk factors.
