Munis cheapened on the short end on Monday, as U.S. Treasuries were mixed and equities ended higher.
Muni yields cheapened by up to ten basis points, depending on the scale, with losses in the short and intermediate portions of the curve. BVAL and ICE now show the two-year yield above 3%, joining MMD and S&P. UST yields were weaker by one basis point for bonds two years and shorter, and richer by one to four basis points beyond the two-year mark.
The muni market saw "enormous" activity last week, according to Patrick Luby, head of municipals and senior market municipal strategist for CreditSights, from the par amount traded to ETF turnover and flows.
This week has a bigger calendar than last week, and the Federal Open Market Committee meeting is in the rearview mirror, Luby said.
"Individual investors who are looking for income, they're in a position to lock in more income, get some some nice yields with curb appeal," Luby said.
The long end of the tax-exempt curve — 15 years and longer — has underperformed enough over the last couple weeks that after-tax yields are now at parity with or cheaper than corporate and taxable muni yields, Luby said. That invites insurance companies and banks to participate in the negotiated market.
