The Bond Buyer’s weekly yield indexes increased this week as the absence of an extension of the Build America Bond program in a new tax bill led to two consecutive mid-week routs that brought 20-year yields to a 17-month high.
“There’s been a lot of volatility this week,” Evan Rourke, portfolio manager at Eaton Vance, said Thursday. “There’s still a lot of confusion with BABs. Today they were dead, yesterday they were getting extended, the day before they’re dead, and so on. All in all, not a great week for munis.”
Rourke added that the market will continue to see patches of weakness until there is certainty over the future of the BAB program.
“A fair amount” of weakness is priced in if the program is not extended, “but perhaps not all of it,” he said. “I think getting through the [30-year Treasury] auction is the big factor helping us today, allowing munis to get more support. The relative value is helping us.”
The Bond Buyer 20-bond index of 20-year general obligation bond yields rose 21 basis points this week to 4.86%. This is the highest level for the index since June 18, 2009, when it was also 4.86%.
The 11-bond GO index of higher-grade 20-year GO yields also increased 21 basis points this week, to 4.60%, the highest it has been since June 18, 2009, when it was also 4.60%.
The revenue bond index, which measures 30-year revenue bond yields, gained 14 basis points this week to 5.32%. This is its highest level since Sept. 10, 2009, when it was 5.33%.
The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, rose three basis points this week to 0.57%, its highest level since July 7, when it was 0.59%.
The yield on the 10-year Treasury note rose 22 basis points this week to 3.22%. It is at its highest level since June 10, when it was 3.32%.
The yield on the 30-year Treasury bond increased 14 basis points this week to 4.41%, which is the highest it has been since May 13, when it was 4.45%.
The weekly average yield to maturity on The Bond Buyer’s 40-bond municipal bond index, which is based on 40 long-term municipal bond prices finished at 5.41%, up 14 basis points from last week’s 5.27%, the highest level since Dec. 30, 2009.