Long-Term Yields Decline as Sessions Firm Up

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All The Bond Buyer’s weekly long-term yield indexes declined this week, as the muni market grew firmer in each session.

“We’ve had a lot of inquiry from crossover buyers, and we’ve had some participation there,” said John Hallacy, head of muni research at Bank of America Merrill Lynch.

“We’ve kind of rallied in the last several sessions, so the levels are improving,” he said. “Perhaps some have thought the market was oversold and just came in and started to function a little bit more.”

No session saw long-end yields drop more than four basis points, but steady gains throughout the week helped drive yields lower by double-digit totals. The gains weren’t extended to short-term debt, but triple-A tax-exempt yields were lower by eight, 16, and 10 basis points on the week for 10-year, 20-year, and 30-year debt, respectively, according to Municipal Market Data.

The light issuance that has followed the Dec. 31 expiration of the Build America Bond program has placed this month on pace for the lowest level of primary market supply recorded in a January in more than a decade.

The Bond Buyer 20-bond index of 20-year general obligation bond yields declined 16 basis points to 5.25%. This is the lowest level for the index since Jan. 6, when it was 5.08%.

The 11-bond GO index of higher-grade 20-year GO yields also dropped 16 basis points, to 5.00%, which is its lowest level since Jan. 6, when it was 4.84%.

The 30-year revenue bond index fell five basis points to 5.61%, but remained above its 5.60% level from two weeks ago.

The Bond Buyer one-year note index rose two basis points to 0.54%, but remained below its 0.55% level from two weeks ago. The yield on the 10-year Treasury note declined four basis points to 3.40%, but it remained above its 3.31% level from two weeks ago. The yield on the 30-year Treasury bond dropped three basis points this week to 4.57%, but remained above its 4.50% level from two weeks ago.

The weekly average yield to maturity on The Bond Buyer’s 40-bond municipal bond index fell 12 basis points this week to 5.81%, but it remained above its weekly average of 5.70% from two weeks ago.

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