Top-shelf municipal bonds finished mostly stronger on Wednesday, according to traders, as yields were as many as four basis points lower in some maturities on news that the Federal Open Market Committee announced a raise in interest rates by 0.25%, as was anticipated.
Secondary Market
The 10-year benchmark muni general obligation yield was four basis point lower to 2.45% from 2.49% on Tuesday, while the yield on the 30-year GO was four basis points lower to 3.21% from 3.25%, according to a final read of Municipal Market Data's triple-A scale.
U.S. Treasuries were stronger at Wednesday's close. The yield on the two-year Treasury was down to 1.31% from 1.38% on Tuesday, while the 10-year Treasury yield was down to 2.50% from 2.59%, and the yield on the 30-year Treasury bond decreased to 3.11% from 3.17%.
On Wednesday, the 10-year muni to Treasury ratio was calculated at 97.9%, compared with 96.0% on Tuesday, while the 30-year muni to Treasury ratio stood at 103.5%, versus 102.5%, according to MMD.
Primary Market
As expected, the Federal Open Market Committee Wednesday announced it raised the fed funds target by 25 basis points to between 0.75% and 1.00%.
The market priced in the hike after Fed officials called the March meeting "live" or said a rate hike could be appropriate "soon."
"Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," Federal Reserve Board Chair Janet Yellen said in a March 3 speech, sealing the market's expectations.
The Fed also released its Summary of Economic Projections, or dot plot, which still calls for three rate hikes this year.
Federal Reserve Bank of Minneapolis President Neel Kashkari dissented, preferring no rate hike.
The Fed's statement said labor market strengthening continued, with solid job gains and steady unemployment. Moderate gains were made in household spending and business fixed investment firmed.
"Inflation has increased in recent quarters, moving close to the Committees 2 percent longer-run objective; excluding energy and food prices, inflation was little changed and continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer term inflation expectations are little changed, on balance," according to the statement.
The FOMC said near-term economic risks appear "roughly balanced."
Despite the 25 basis point increase, "monetary policy remains accommodative," according to the statement.
On Dec. 14, the FOMC last raised its fed funds target by 25 basis points to between 0.50% and 0.75%, with a unanimous vote.
There were no large deals scheduled for Wednesday, as is typical on days when the FOMC meets. The last issuance of the week will be occurring tomorrow, with the bulk of the issuance coming via competitive deals.
The Empire State Development Corporation is scheduled to sell a total of roughly $1.84 billion in five separate sales. The New York State Urban Development Corporation State personal income tax revenue general purpose bonds will feature both taxable and tax-exempts. The two larger sales of $523.515 million and $507.32 million will be taxables and the other three sales of $318.975 million, $247.93 million and $246.355 million will be tax-exempts. The deals are rated triple-A by S&P Global Ratings and AA-plus by Fitch Ratings.
Boulder Valley School District No. RE-2, Colo. is set to sell roughly $284.88 million over two separate deals. The general obligation and GO refunding bonds are rated Aa1 by Moody's and AA-plus by S&P and Fitch Ratings.
