Munis weaken again as Treasury yields spike, and the week winds down

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Munis weakened significantly for the second day in a row after the 10-year Treasury hit 3.1268% Wednesday, its highest point since 2011.

Secondary market
Municipal bonds were weaker on Thursday, according to a midday read of the MBIS benchmark scale, with yields rising as much as four basis points in the one- to 30-year maturities.

High-grade munis were weaker as well, according to yields calculated on MBIS' AAA scale, which saw yields rising by up to five basis points in the one- to 30-year maturities.

Municipals were also weaker on Municipal Market Data’s AAA benchmark scale, which showed the yield on the 10-year muni general obligation rising between one and three basis points. The yield on 30-year muni maturity was between two and four basis points higher.

On Wednesday, the 10-year muni-to-Treasury ratio was calculated at 82.9% while the 30-year muni-to-Treasury ratio stood at 98.6%, according to MMD. The muni-to-Treasury ratio compares the yield of tax-exempt municipal bonds with the yield of taxable U.S. Treasury with comparable maturities. If the muni/Treasury ratio is above 100%, munis are yielding more than Treasury; if it is below 100%, munis are yielding less.

Muni money market funds back in the green
Tax-free municipal money market fund assets increased $497.2 million, raising their total net assets to $131.52 billion in the week ended Oct. 1, according to the Money Fund Report, a service of The inflow is a reversal from last week, which saw minor outflows of $82.1 million. The average, seven-day simple yield for the 199 tax-free and municipal money-market funds climbed to 1.09% from 1.03% last week.

Taxable money-fund assets decreased by $15.54 billion in the week ended Oct. 2, lowering its total net assets to $2.703 trillion. The average, seven-day simple yield for the 830 taxable reporting funds rose to 1.72% from 1.63% last week. Overall, the combined total net assets of the 1,029 reporting money funds decreased by $15.04 billion to $2.834 trillion in the week ended Oct. 2.

Previous session's activity
The Municipal Securities Rulemaking Board reported 45,650 trades on Wednesday on volume of $15.587 billion.

New York, California and Texas were the municipalities with the most trades, with the Empire State taking 17.131% of the market, the Golden State taking 14.041% and the Lone Star State taking 11.279%.

Treasury announces next week’s auctions
The Treasury Department announced these auctions:

  • $15 billion 29-year 10-month 3% bonds selling on Oct. 11;
  • $23 billion 9-year 10-month 2 7/8% notes selling on Oct. 10;
  • $36 billion 3-year notes selling on Oct. 10;
  • $26 billion 364-day bills selling on Oct. 9;
  • $42 billion 182-day bills selling on Oct. 9; and
  • $48 billion 91-day bills selling on Oct. 9.
  • $40 billion 28-day bills selling on Oct. 9.

Gary E. Siegel contributed to this report.

Data appearing in this article from Municipal Bond Information Services, including the MBIS municipal bond index, is available on The Bond Buyer Data Workstation. Click here for a brief tour of the Workstation, or contact Ziad Saba at 212-803-6079 for more information.

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