Long-term municipal bond yields fell across the board this week, according to the Bond Buyer’s weekly yield indexes. The strengthening did not keep pace with Treasury yields, however, which fell much more sharply.
“Munis tend to track the flight to quality that’s pushing Treasuries higher, but you’ll see that spread waffling — it’s not going to be in lockstep,” said Phil Villaluz, municipal strategist at Advisors Asset Management.
The California Department of Water Resources took advantage of lower yields by increasing the size of its power supply refunding deal from $2 billion to $2.99 billion, making it the largest tax-exempt issue of the year.
Villaluz called it “refreshing” that investors still have a strong taste for traditional munis.
The yield on the U.S. Treasury’s 10-year note dropped 36 basis points in the week to 3.38%, the lowest it has been since Nov. 24, 2009, when it was 3.31%. The yield on the Treasury’s 30-year bond plunged 43 basis points this week to 4.17%, the lowest yield for the since early October.
The Bond Buyer’s 20-Bond GO index of 20-year general obligation yields declined eight basis points in the week to 4.29%, marking the lowest level since Dec. 30, 2009, when it was 4.25%.
The 11-Bond GO index of higher-grade 20-year GO yields also dropped eight basis points to 4.00%, its lowest level since late Dec. 30, when it was 3.97%. The revenue bond index, which measures 30-year revenue bond yields, dropped two basis points this week to 4.89%, its lowest point since late October, when it was 4.87%.
In contrast to long-term rates, the one-year note index rose two basis points to 0.53%, but remained below its 0.54% level from two weeks ago.
The average weekly yield to maturity of The Bond Buyer Municipal Bond Index, based on 40 long-term bond prices, declined four basis points to 5.09%, its lowest weekly average since the week ended Oct. 15, when it was 5.08%.