The Bond Buyer’s weekly yield indexes declined this week as the municipal market rallied behind the economic warning the Federal Open Market Committee sounded Tuesday to end a weeks-long pattern of losses.
“It looks like we’ve reversed the pattern of earlier September and we’re back in rally mode again,” said Michael Pietronico, chief executive officer at Miller Tabak Asset Management. “You can look to that Fed statement as the catalyst. It caught some people off guard. Now it seems as if retail is engaged and putting money to work.”
Appetite for Treasuries began strengthening after the Federal Reserve indicated the economic recovery would be “modest” and inflation would likely remain “subdued.”
Muni yields declined an average of five to 10 basis points, depending on maturity, during the past three sessions.
The central bank suggested further quantitative easing could be possible if conditions warrant — a step that could further reduce interest rates, thereby making Treasuries more attractive.
Fed chairman Ben Bernanke also expressed concern that the Fed might fail to meet its dual mandate to promote price stability and full employment if the current inflation rate remains too low and unemployment too high.
In the new-issue market this week, Utah sold more than $1 billion of taxable and tax-exempt debt.
The Bond Buyer 20-bond index of 20-year general obligation bond yields declined six basis points this week to 3.83%. This is the lowest level for the index since May 4, 1967, when it was 3.79%.
The 11-bond index of higher-grade 20-year GO yields also fell six basis points this week to 3.57%, which is the lowest the index has been since April 20, 1967, when it was 3.53%.
The revenue bond index, which measures 30-year revenue bond yields, declined five basis points this week to 4.58%. That is its lowest level since May 31, 2007, when it was 4.57%.
The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, declined to 0.43%, which is its lowest level since March 31.
The yield on the 10-year Treasury note narrowed 20 basis points this week to 2.56% — the lowest yield since 2.50% on Aug. 26. The yield on the 30-year Treasury bond fell 19 basis points this week to 3.74%, its lowest level since Sept. 2, when it was 3.72%.
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, dropped one basis point this week to 4.89%.
