The Bond Buyer’s yield indexes climbed this week as tax-exempt yields edged higher against a large new-issue calendar and a weakening Treasury market.
“I would characterize the last week as the municipal market recognizing that the Treasury market still matters,” said Michael Pietronico, chief executive officer at Miller Tabak Asset Management. “For a matter of months, the muni market, positively so, was trading in its own vacuum, so to speak, and I think the higher Treasury rates in particular this week with declining ratios and a surging amount of municipal supply took its toll.”
Leading the market this week, the Puerto Rico Sales Tax Financing Corp. Wednesday priced $4.1 billion of bonds, while Los Angeles County yesterday priced $1.3 billion of notes.
Pietronico said the market now “is trying to grapple with the concept of how much more refunding deals might we see on the tax-exempt side because of the lower Treasury ratios.”
“So there’s a bit of an offset to the Build America Bonds story of taking bonds out of the market, and that is increased amounts of refundings, because we’re at lower ratios,” he said.
The Bond Buyer 20-bond index of 20-year general obligation bond yields rose 15 basis points to 4.86% — the highest it has been since April 8, when it was 4.92%.
The 11-bond index of higher-grade 20-year GO yields also rose 15 basis points this week, to 4.60%. That’s the highest level since April 8, when it was 4.68%.
The revenue bond index, which measures 30-year revenue bond yields, increased 13 basis points this week to 5.76%, which is the highest it has been March 26, when it was 5.78%.
The 10-year U.S. Treasury note yield rose 16 basis points this week to 3.87%, and is at its highest level since Oct. 30, 2008, when it was 3.94%. The 10-year note’s yield has risen in nine of the past 12 weeks. It is up 127 basis points from its most recent low of 2.60% on March 19.
The 30-year Treasury bond yield rose 12 basis points this week to 4.70%, which is the highest it has been since June 19, 2008, when it was 4.77%. The bond’s yield has risen in nine of the past 10 weeks, up a total of 113 basis points from its most recent low of 3.57% on April 2.
The Bond Buyer one-year note index, which is based on tax-exempt note yields, rose seven basis points to 0.65% after reaching an all-time low of 0.57% the past two weeks.
The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 5.51%, an increase of nine basis points from last week’s 5.42%.