NEW YORK — The middle to long end of the tax-exempt yield curve has been gaining downward momentum.
In particular, yields furthest out on the curve are taking water into the ballast tanks and diving fast. The latest AAA muni scale reads show yields beyond 23 years have submerged up to 18 basis points, thus far.
Following Treasury yields, munis are rebalancing from already extremely low levels. By midday, though, the 10-year Treasury had hesitated around the psychological 1.75% barrier, according to Municipal Market Data analyst Randy Smolik.
“As the taxable market trades narrowly to today’s yield lows,” he wrote in an early afternoon research post, “muni professionals kept beating the bushes, looking for anything with value and keeping yields pressing lower.”
Tax-exempt yields, with the exception of short-term paper, are much firmer as the day’s session crosses into the afternoon, particularly as one strays further out along the curve. Yields are steady out to four years, according to the Municipal Market Data scale.
They are flat to two basis points weaker at the five-year mark. Between six and eight years, yields are four to nine basis points lower. Beyond that, yields are nine to 18 basis points lower.
The 10-year muni yield Wednesday fell three basis points to 2.09%, still up two basis points from the all-time low recorded early last week. The 30-year yield also dropped three basis points to 3.62%. The two-year yield stayed at 0.32% for a fifth straight session.
Treasury yields continued to firm across the curve crossing noon. The benchmark 10-year Treasury yield, after falling eight basis points Wednesday to 1.86%, its lowest yield in many decades, has decreased another nine basis points to a mind-staggering 1.77%.
The 30-year yield plunged 18 basis points Wednesday, settling at 3.02%. Currently, it is down another 16 basis points to 2.86%. The two-year yield has held steady at 0.21%.
The market expected a substantial increase in volume this week to $8 billion, significantly larger than the $4.6 billion weekly average this year. Last week saw a revised $6.2 billion of issuance.
On the negotiated side of the ledger Thursday, William Blair & Co. priced $157 million of Chicago Park District bonds in four series. The bonds were rated Aa2 by Moody’s Investors Service, AA-plus by Standard & Poor’s, and AAA by Fitch Ratings.
Yields for the first series, $36.4 million of general obligation limited tax park bonds, range from 0.40% with a 3.00% coupon in 2013 to 4.35% with a 5.00% coupon in 2036. There were no more orders for debt maturing in 2013.
Yields for the second series, $21.2 million of GO limited tax refunding bonds, range from 0.26% with a 3.00% coupon in 2012 to 2.65% with coupons of 4.00% and 5.00% in a split maturity in 2021. There were no more orders for credits maturing in 2012, 2013, and from 2017 to 2021.
Yields for the third series, $72.8 of GO unlimited tax refunding bonds, range from 0.26% with a 2.00% coupon in 2012 to 3.98% with a 5.00% coupon in 2029. There were no more orders for debt maturing in 2012, 2022, and 2023.
Yields for the fourth series, $26.7 million of GO unlimited tax refunding bonds, range from 0.26% with a 3.00% coupon in 2012 to 2.18% with a 4.00% in 2019. There were no more orders for credits maturing in 2012 through 2014, and in 2017.
The equities markets continue to reel from the Federal Open Market Committee message, with all major indexes falling sharply after the announcement of its policy decision surfaced. The Dow Jones Industrial Average, which saw a 2.5%, 283-point plunge Wednesday, has so far nose-dived 3.93%, slipping 437 points Thursday.
