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 and muni yields increased last week for all maturities.
- There was a notable upgrade for the Township of Marlboro, NJ’s GO Bonds rating by Moody’s, the details of which are provided below.
- There was no major update on Puerto Rico’s bond market last week.
Full-Week Bond Market Summary for Oct 10-14
- The increase in Treasury yields was led by the 30-year maturity last week.
- U.S. economic data, Fed minutes from its September meeting, and Fed Chair Janet Yellen’s speech caused the rise in yields.
- The muni bond market followed the Treasury market’s trend.
- Probability of a Fed rate hike in December hovers around 65%.
Detailed Report
- Last week long-term maturity yield increased more than short-term maturity.
- U.S. economic data release helped yields to surge.
- The 30-year maturity Treasury increased by 11 bps.
- After Janet Yellen’s speech on Friday, the market probability of an interest rate hike for December is now around 65%.
- Muni bond market yields rose as well last week, led by the 30-year maturity.
- New issue supply of $8.5 billion was well received.
- Muni fund flows were positive for the 54th consecutive week, at $147 million.
- This week’s new issue supply is expected to be outsized, at $15.5 billion.
- This week’s new issue supply is higher, due to a large $1.3 billion state-enriched deal for below-investment-grade rated Philadelphia School District.
- The muni high-yield bond sector outperformed last week.
- As the market tries to absorb some of the largest supply this year, high-yield muni bonds have been under-performing high grades.
Moody’s Upgrade/Downgrade
Upgrades:
Township of Marlboro, NJ’s GO:
Moody’s Investors Service has upgraded the Township of Marlboro, NJ’s GO rating to Aa1 from Aa2. It reflects the township’s modestly growing tax base, continued positive trend in reserves, and above-average income and wealth levels. Growth in the tax base, income levels, or both, could lead to a further upgrade in rating.
Downgrades:
City of Dallas, TX’s GOLT:
Moody’s Investors Service has downgraded to Aa3 the city of Dallas, TX’s outstanding GOLT debt. The downgrade primarily reflects the city’s exposure to increasing unfunded pension liabilities. Hence, material improvement to annual pension funding could lead to a rating upgrade.
Treasury Notes Yield Report
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.84% | 1 | 7 |
| 5-year | 1.29% | 3 | 14 |
| 10-year | 1.80% | 8 | 20 |
| 30-year | 2.56% | 11 | 24 |
Municipal Index Curve Yields
| Year | Yield | +/- BPS in Week | +/- BPS in Month |
|---|---|---|---|
| 2-year | 0.88% | 2 | 6 |
| 5-year | 1.13% | 3 | 11 |
| 10-year | 1.71% | 7 | 20 |
| 30-year | 2.56% | 11 | 25 |
Yield Ratios: Municipal Bonds vs. Treasury Bonds
| Yield Ratios | Ratio (%) |
|---|---|
| 10-year AAA Municipal vs Treasury | 95% |
| 30-year AAA Municipal vs Treasury | 100% |
| High Yield Municipal vs High Yield Corporate | 89% |
For more info, How Pension Obligations Could Jeopardize the Muni Market gives a closer look at how pension obligations are affecting the muni bonds market and provides further insights for investors to consider.
