The Bond Buyer’s weekly yield indexes rose this week, though 10-year yields in the Treasury market declined, as the movement of leveraged and institutional buyers to the sidelines decreased demand and led to a steepening of the yield curve.
“There’s been some steepening going on, reflecting the general uneasiness of the market,” said Evan Rourke, portfolio manager at MD Sass. “You’ve got the leveraged players on the sidelines; the tender option bond and [arbitrage] players who’ve been kind of flattening the curve don’t seem to be participating. Not having those people participating in the market is taking a big source of demand out.”
Rourke said that in addition, traditional institutional investors have also moved to the sidelines in the wake of the recent worries about bond insurers, leaving individual investors in the market to buy bonds.
“With individuals, while they’ve shown up sporadically, they aren’t as excited about the market as they were when they could get 4% in 10 years,” Rourke said. “We need to get cheaper before we can bring in individual investors in size, so the result is you’ve got a market that’s somewhat stale. Dealers are looking to year-end, so there’s not really a lot of incentive for them to step up and do anything. It’s making for a queasy bid side, and in general, people are reluctant to take on risk at this part of the year.”
The municipal market was slightly firmer Friday and largely unchanged Monday. However, on Tuesday, municipals weakened following the Treasury market.
Then, Wednesday, munis were also slightly weaker, as investors remained uncertain about market dynamics, while a $900 million Puerto Rico Public Buildings Authority deal scheduled for pricing was postponed. This continued yesterday, when tax-exempts were weaker by one basis point, as market conditions remained uncertain, and a Miami-Dade County deal set to price — once scheduled to be worth $600 million — was also postponed.
The Bond Buyer 20-bond index of GO yields rose 14 basis points this week to 4.54%, its highest level since Sept. 6, when it was 4.57%.
The 11-bond index rose 13 basis points to 4.47%, which is its highest level since 4.51% on Sept. 6.
The revenue bond index rose 12 basis points to 4.85%, its highest level since 4.89% on Aug. 23.
The 10-year Treasury note fell five basis points to 4.30%, its lowest level since Sept. 29, 2005, when it was 4.29%.
The 30-year Treasury bond rose four basis points to 4.68%, its highest level since Oct. 18, when it was 4.78%.
The Bond Buyer one-year note index rose one basis point to 3.33%, but remained below its 3.39% level from two weeks ago.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.86%, up seven basis points from last week’s 4.79%.
