Municipal bond yields lagged Treasury interest rates this past week, after the ratio between the two touched a year-to-date low early in the week.
Thirty-year Treasury bond yields fell seven basis points to 3.44% from April 17 to Friday afternoon, while 10-year bonds slid four basis points. Muni bond yields during the same period were largely unchanged, with 30 and 10-year AAA bonds at 2.27% and 3.49%, respectively.
On Monday, the ratio of 10-year muni to Treasury yields touched 83%, the lowest so far this year, according to Municipal Market Data. That figure has risen to 85% since Monday as tax-exempt municipal bonds remain expensive relative to Treasuries.
"Long term munis are the real stars," J.R. Rieger, global head of fixed income at S&P Dow Jones Indices, wrote in a report Friday. "Despite a potentially rising interest rate environment the municipal bond market has returned equity like results in 2014 year to date."
High-yield bonds have returned 6.69% year-to-date, according to SPDJI's high-yield index. Corporate high-yield bonds have returned 3.48%, while the S&P 500 Index has posted a 2.26% return.
Munis strengthened Friday afternoon, with yields on bonds on the intermediate part of the curve falling as much as three basis points, and those maturing beyond 2039 losing as much as four basis points. Short-term bonds held steady, according to the Municipal Market Data's triple-A scale.
Treasuries strengthened, with the 30-year yield falling five basis points to 3.44% and the 10-year benchmark dropping three basis points to 2.67%. Two-year yields were down one basis point to 0.45%.
Next week's total potential volume is expected to be light once again at $4.46 billion, down from this week's $6.37 billion issuance.
There are no deals over $100 million slated to enter the negotiated or competitive markets Friday.
Municipal mutual funds saw inflows increase to $244.26 million for the week ended April 23 from the prior week's inflows of $74.03 million.
