Little Movement and Good Supply Leave Yields Mixed

The Bond Buyer’s yield indexes were mixed this week, as the municipal market experienced little movement, with a good primary market supply and fairly light secondary trading activity.

Evan Rourke, portfolio manager at Eaton Vance, said the week “definitely had a summery feel to it.”

“It’s kind of a quiet week, with fairly low volume, but there does seem to be some cash around,” Rourke said. “There was a little bit of flattening on the very long end of the curve, as a result of accumulation of BABs; there’s been a lot of BAB issuance. We absorbed supply pretty nicely, but the market’s kind of drifting a little bit, lacking a little bit of direction.”

“We had such a down July in terms of new issuance, so you hoped you’d see a pick-up in issuance, but you have to wonder what will be taken out from BABs,” he said. “Going forward, for the rest of this month, I think it’s going to be pretty quiet. The next two weeks are going to be prime vacation time, between bankers and government officials. So you’ll see a slowdown, and then hopefully in September, we’ll see a pickup in issuance heading into the fourth quarter.”

In the new-issue market this week, both the Ohio Higher Education Facilities Commission and the New York City Transitional Finance Authority brought to market $800 million tax-exempt deals. Leading the BAB market, the Metropolitan Water Reclamation District of Greater Chicago priced a $600 million transaction.

The Bond Buyer 20-bond index of 20-year general obligation bond yields was unchanged this week at 4.65%.

The 11-bond index of higher-grade 20-year GO yields was also unchanged this week, at 4.38%.

The revenue bond index, which measures 30-year revenue bond yields, declined two basis points this week to 5.66%, matching its level from two weeks ago.

The 10-year Treasury note yield declined 16 basis points this week to 3.60%. This is the lowest yield for the 10-year note since July 16, when it was 3.57%.

The 30-year Treasury bond dropped 11 basis points through the week to 4.42%, the lowest the yield has been since July 9, when it was 4.31%.

The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, rose two basis points this week to 0.83%, matching its level from two weeks ago.

The weekly average yield to maturity on The Bond Buyer’s 40-bond municipal bond index, which is based on 40 long-term municipal bond prices finished at 5.56%, down two basis points from last week’s 5.58%.

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