All of The Bond Buyer’s long-term weekly yield indexes declined this week, powered by light issuance and predictions of strong seasonal cash inflows.
From the close of May 27 until Wednesday, muni yields saw an estimated five basis point drop, particularly toward the longer end of the curve, according to Fred Yosca, manager of underwriting and trading at BNY Mellon Capital Markets.
Given the holiday weekend, the industry expected light volume this week. Estimates by Ipreo LLC and The Bond Buyer had $2.5 billion of new issuance slated for the week. That compared with a revised $4.3 billion that came to market last week.
Likewise, Interactive Data estimated that $78 billion would come due during this summer’s two-month reinvestment season on June 1 and July 1. The numbers have fallen from last year’s, which totaled $101 billion.
“The technicals are just so strong right now,” Yosca said. “Light issuance due to the holiday weekend, combined with the seasonal cash inflows June 1 and July 1, and the scales are heavily tipped in favor of the upside, because of strong demand and low supply.”
Muni yields held steady across the curve from last Friday through Tuesday, the lone exception being a basis point drop on bonds maturing in 2012 Tuesday.
Tax-exempt yields then firmed across the curve Wednesday.
Overall, those strong technicals set the course for the long-term muni yield indexes for the week.
The Bond Buyer’s 20-bond index of 20-year general obligation yields declined two basis points this week to 4.51%, a 29-week low. The 11-bond GO index of higher-grade 20-year GO yields dropped two basis points this week as well, to 4.25%, also a 29-week low.
The revenue bond index, which measures 30-year revenue bond yields, declined five basis points this week to 5.33%, a 25-week low.
The Bond Buyer’s one-year note index rose two basis points this week to 0.40%, but remained below its 0.43% level from two weeks ago. One week ago, the index — which began in July 1989 — reached a record low of 0.38%.
The yield on the Treasury’s 10-year note declined four basis points this week to 3.03%, while the yield on the 30-year Treasury bond gained two basis points this week to 4.25%, but remained below its 4.30% level from two weeks ago.
The average weekly yield to maturity of The Bond Buyer municipal bond index, which is based on 40 long-term bond prices, fell five basis points to 5.32%, a 26-week low.
