The global flight from risk continued to bolster the municipal bond market on Wednesday as the prospect of a nuclear meltdown in Japan enhanced the appeal of the shelter of low-risk bonds.
The dumping of risky assets in favor of Treasury debt actually accelerated Wednesday as the news out of Japan appeared starker.
The 10-year Treasury yield plunged 12 basis points, and the S&P 500 Index slipped 1.9%.
Municipals generally benefit from flights to safety because of historical correlations with Treasuries over time.
The 10-year triple-A municipal yield shed three basis points to 2.9%, after dropping seven basis points the day before, based on the Municipal Market Data scale. The entire MMD yield curve has strengthened the past two days, by a mighty 10 basis points for most maturities 10 years and out.
The 10-year yield is at its lowest level since early December.
“With the stock market running down, people have money and they don’t know where to put it,” said a trader in Chicago. “We’re seeing some interest. It hasn’t been robust, but it’s been steady.”
Evidence of the municipal market’s strength could be detected in the secondary market trading of Maryland’s $485 million deal that priced last week with unsold balances. The 2026 maturity of that deal changed hands Wednesday at a yield of 3.6%, a solid 15 basis points lower than a similar type of transaction a day earlier.
The big deal in the primary market was Boston, which is yet another high-grade issuer to bring a mid-sized bond sale to market during a supply drought.
Maryland, the Georgia Road and Tollway Authority, Portland, Ore., Connecticut, and Wake County, N.C., have all found willing buyers in the current environment the last two weeks.
While not all the pricing for Boston’s $182 million deal was available by press time, early indications were the city, whose credit is very well-regarded, commanded strong bids.
Jefferies was the winning bidder on a $14.4 million piece of the deal in the competitive market. A five-year maturity priced at a yield of 1.68%, just about in line with the triple-A scale.
