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Bond Buyer Indexes

Yields Rise as Even Good Credits Have Hard Time

The Bond Buyer’s long-term weekly yield indexes rose this week as media reports about the possibility of a string of municipal bankruptcies weighed on ­investors.

“Municipals have succumbed to headline risk, and it seems as if retail is taking their ball and going home,” said Michael ­Pietronico, chief executive officer at Miller Tabak Asset Management.

“Mutual funds are the dominant players right now, unloading bonds at a rapid pace. There is scattered interest, but structurally, the muni market will have difficulty absorbing large blocks, without an institutional presence on a day-to-day basis.”

Pietronico said this week’s losses call into question the market’s ability to take on a heavier new-issue calendar.

Amid the rising rates and market uncertainty, Bank of America Merrill Lynch priced $967.7 billion of school construction bonds for the New Jersey Economic Development Authority Thursday in a deal downsized from an originally scheduled $1.9 billion. Yields were raised about 18 basis points from retail levels to complete the issuance.

“That deal shows that even a reasonably good credit is having a hard time,” Pietronico said. “With BABs gone, the long end has basically lost its training wheels, and now it has to learn how to ride a bike all over again. That means higher yields.”

The Bond Buyer 20-bond index of 20-year general obligation yields rose 31 basis points this week to 5.39%. This is the highest level for the index since Dec. 18, 2008, when it was 5.46%.

The 11-bond GO index of higher-grade 20-year GO yields increased 30 basis points this week to 5.14%, which is its highest level since Dec. 18, 2008, when it was 5.25%.

The revenue bond index, which measures 30-year revenue bond yields, gained 16 basis points this week to 5.60%. This is its highest level since Aug. 20, 2009, when it was 5.62%.

The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, ­declined two basis points this week to 0.55%, but remained above its 0.53% level from two weeks ago.

The yield on the 10-year Treasury note dropped 11 basis points this week to 3.31%, which is its lowest level since Dec. 9, 2010, when it was 3.22%.

The yield on the 30-year Treasury bond fell four basis points this week to 4.50%, but remained above its 4.41% 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 5.70%, up 16 basis points from last week’s 5.54%.

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