Bond Buyer Indexes Mixed as Sell-Off Erodes Slight Gains

The Bond Buyer's weekly indexes were mixed this week, as slight gains were nearly washed away by a sell-off yesterday.

"It's been a mixed little week," said Evan Rourke, portfolio manager at MD Sass. "Munis had a good rally from the end of last week to the beginning of this week, and it outperformed a bit, and I think we just finally ran out of steam with the Treasury market weaker."

"I think we're just losing momentum with people getting ready for the long weekend, and there's a lot of focus now on reinvestment flows," he added. "I think people feel pretty good about muni cash, but in the face of Treasuries being off as much as they were [yesterday], munis were bound to get a little weaker."

The municipal market was slightly firmer Friday in light trading. On Monday, tax-exempts were unchanged to slightly firmer, following Treasuries.

Also Monday, the Supreme Court overturned a Kentucky appellate court ruling and protected a long-held status quo when it determined that states can tax interest on bonds issued out of state while exempting interest those sold by in-state issuers without violating the commerce clause of the Constitution. Traders said the market showed little reaction to the decision.

Munis were slightly firmer Tuesday, as Pennsylvania brought $405 million of general obligation bonds. Tax-exempt yields were lower by two or three basis points. Pennsylvania's GOs competitively sold to Merrill Lynch & Co. with a true interest cost of 4.11%.

The municipal market was unchanged to slightly firmer Wednesday, despite Treasury market losses. In the new-issue market, Morgan Stanley priced $422.1 million of senior revenue bonds for Colorado's E-470 Public Highway Authority.

The Bond Buyer 20-bond index of GO yields fell one basis point this week to 4.52%, its lowest level since Feb. 14, when it was 4.47%.

The 11-bond index also dropped one basis point, to 4.43%, its lowest level since Feb. 14, when it was 4.38%.

The revenue bond index rose one basis point this week to 4.99%, but it remained below its 5.07% level from May 1 and 8.

The 10-year Treasury note rose nine basis points to 3.92%, which is the highest since Dec. 27, 2007, when it was 4.19%.

The 30-year Treasury bond rose seven basis points to 4.63%, which is its highest level since Feb. 14, when it was 4.68%.

The Bond Buyer one-year note index fell three basis points to 1.79%, which is the lowest since April 23, when it was 1.69%.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.08%, up seven basis points from last week's 5.01%.

 

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