The municipal market has steadied somewhat after muni yields mostly battled those of Treasuries to a draw over the week.
New-issuance found buyers with few hiccups. But traders reported a sturdy overhang of bid-wanteds in the secondary that weighed down the market.
Treasury yields, more than the calendar, drove those of munis both higher and lower as the week progressed, according to Michael Pietronico, chief executive officer of Miller Tabak Asset Management.
“The market still feels as if there’s a reasonable amount of supply coming,” he said. “But it also feels at this point that it’s forming a bottom around the belly of the yield curve.”
Muni bond indexes still show a market that’s backing up.
The Bond Buyer’s 20-bond index of 20-year general obligation yields increased six basis points this week to 4.01%. It stands at its highest level since Dec. 1, when it was 4.12%.
The 11-bond index of higher-grade 20-year GO yields rose seven basis points this week to 3.79%. That represents its highest level since Dec. 1, when it was 3.85%.
The yield on the Treasury’s 10-year note declined one basis point this week to 2.28%. But it remains above its 2.03% level from two weeks ago.
The yield on the Treasury’s 30-year bond fell five basis points this week to 3.37%. Still, it sits higher than its 3.18% level from two weeks ago.
The benchmark 10-year triple-A yield has risen 57 basis points since the start of February, and 23 basis points since March 12.
Since last Friday, it has fallen one basis point, closing Thursday’s session at 2.25%, according to Municipal Market Data.
The two-year muni yield hovered at 0.36% all week.
Meanwhile, the 30-year triple-A yield slid two basis points on the week to 3.42%, recovering from a high of 3.48%.
The muni market saw yields beyond the short end of the curve surge on Monday and Tuesday, only to rally on Wednesday and Thursday.
Treasury yields performed a similar dance across the curve, only starting each ascent and descent one day earlier.
The 10-year triple-A remains well below its historical three- and five-year averages, according to numbers from RBC Capital Markets.
The benchmark muni yield’s extensive backup should be viewed as a healthy correction, Pietronico said.
“And now it should be viewed as short-term oversold, meaning that it’s apt to see a nice bounce-back in terms of higher prices and lower yields,” he said.
Over the near term, April’s employment report stands out as the next huge hurdle for interest rates, Pietronico said. The municipal market will likely be range-bound until that point, he added.
If muni yields have been range-bound, then so have their ratios to Treasuries. Ratios across the curve have mostly settled around 100% since last Friday.
Over that period, the 10- and 30-year ratios largely ended where they started, at 98.7%. The two-year ratio ended five percentage points richer since last Friday, falling to 94.7% from 100%.
The revenue bond index, which measures 30-year revenue bond yields, gained five basis points this week to 4.88%. It is at its highest level since Jan. 5, when it was 4.93%.
The Bond Buyer’s one-year note index, which is based on one-year GO note yields, increased two basis points this week to 0.24%. This stands the same level as two weeks ago.
The weekly average yield to maturity of The Bond Buyer municipal bond index, which is based on 40 long-term bond prices, increased five basis points this week to 4.68%. It is the highest weekly average for the yield to maturity since the week ended Jan. 12, when it was 4.73%.
