Weekly Yields Decline as First Two BAB Deals Price

The Bond Buyer’s weekly yield indexes declined as the municipal market firmed up in nearly all  sessions due to strong retail demand and the first two deals containing Build America Bonds were priced in the primary ­market.

The University of Minnesota and the University of Virginia were the first issuers to publicly offer Build America Bonds. The deals priced Wednesday under the program created by the American Recovery and Reinvestment Act.

George Strickland, managing director and portfolio manager at Thornburg Investment Management in Santa Fe, N.M., said that there has been strong interest in the BABs — the University of Virginia deal in particular.

“I haven’t seen much activity on the Minnesota ones, but the University of Virginia ones seem to be [attracting interest],” Strickland said. “They’re trading up nicely, and kind of setting the stage for the big California deal next week. I expect it to do well, based on the Virginia and what I’m hearing about initial interest in the Cal deal.”

California next week will come to market with a $4 billion taxable general obligation sale, which is slated to include billions  of BABs.

The Bond Buyer 20-bond index of 20-year general obligation bond yields declined 14 basis points this week to 4.78%, which is the lowest level for the index since Sept. 11, 2008, when it was 4.54%.

The 11-bond index of higher-grade 20-year GO yields declined 15 basis points this week to 4.53%, which is the lowest it has been since Sept. 11, 2008, when it was 4.45%.

The revenue bond index, which measures 30-year revenue bond yields, declined 11 basis points this week to 5.63%, which is its lowest level since Sept. 25, 2008, when it was 5.56%.

The 10-year Treasury note yield fell one basis point this week to 2.84%, but remained above its 2.75% level from two weeks ago.

The 30-year Treasury bond yield rose four basis points this week to 3.71%, which is the highest yield for the bond since Nov. 13, 2008, when it was 4.34%.

The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, fell two basis points this week to 0.68%, but remained above the all-time low of 0.65% set two weeks ago.

The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.51%, down four basis points from last week’s 5.55%.

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