The Bond Buyer’s weekly yield indexes declined this week on the back of a surge of Build America Bonds in the primary market, including more than $5 billion of the new securities from California.
However, the rally, which lasted nearly the entire week, was halted yesterday when tax-exempt yields were unchanged to slightly weaker.
“I think you’re going to get to some point where there’s resistance,” said Evan Rourke, portfolio manager at Eaton Vance. “I think we’ve just reached the end of a fairly decent rally in a short period of time, so that’s what’s caused the market to go a little flat. We need to prove some of these levels. Some of the bond buying this week was perhaps dealing anticipating a rally, and so now I think they need to see their expectations verified.”
Rourke added that in the municipal market, “we went from a scenario in January where we weren’t sure who was going to step in and buy munis, and now we’ve kind of gone the whole gamut the other way.”
“Now people are saying you can’t do refundings, your long bonds are going to be issued as BABs, there’s going to be no munis around, where are we going to get munis from? Obviously, the market perception has been somewhat of an overreaction on both sides,” he said.
The Bond Buyer 20-bond index of 20-year general obligation bond yields declined 21 basis points this week to 4.57%, which is the lowest the index has been since Sept. 11, when it was 4.54%. The 11-bond index of higher-grade 20-year GO yields also declined 21 basis points this week, to 4.32%. This is the lowest the index has been since Feb. 7, when it was 4.24%.
The revenue bond index, which measures 30-year revenue bond yields, dropped 14 basis points this week to 5.49%. This is the lowest level for the index since Sept. 18, when it was 5.44%.
The 10-year U.S. Treasury note yield rose nine basis points this week to 2.93%, which is the highest yield for the note since Feb. 26, when it was 2.99%. The 30-year U.S. Treasury bond yield also rose nine basis points this week to 3.80%, which is the highest yield for the bond since Nov. 13, when it was 4.34%.
The Bond Buyer one-year note index fell nine basis points this week to an all-time low of 0.59%. The previous record low for the index, which began on July 12, 1989, was 0.65% three weeks ago, on April 1.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.38%, which is down 13 basis points from last week’s 5.51%.