Nearly all The Bond Buyer’s yield indexes rose this week, as tax-exempts weakened throughout the holiday-shortened week, erasing some of the pronounced gains taken in August.
Michael Pietronico, chief executive officer of Miller Tabak Asset Management, said that over the past week, the muni market has seen a reversal of the overbought condition in August.
“We see 30% to 40% reversal of August gains before stability comes back,” Pietronico said. “In munis, the beauty is it drops a lot faster than it goes up. It should be over pretty soon. We probably could see another 10-12 basis points of losses before we level out.”
Pietronico noted that the sell-off has been “just the market probing” unsustainable yield levels.
The Bond Buyer 20-bond index of 20-year general obligation bond yields increased six basis points this week to 3.92%. That is the highest the index has been since Aug. 19, when it was 4.03%.
The 11-bond index of higher-grade 20-year GO yields rose seven basis points this week to 3.67%, which is the highest level for the index since Aug. 19, when it was 3.76%.
The revenue bond index, which measures 30-year revenue bond yields, rose two basis points this week to 4.65%. This is the highest level for the index since Aug. 19, when it was 4.69%.
The Bond Buyer one-year note index, which is based on one-year tax-exempt note yields, declined seven basis points this week to 0.44%, which is its lowest level since March 31, when it was 0.43%.
The yield on the 10-year Treasury note rose 13 basis points this week to 2.76%. This is the highest the yield has been since Aug. 5, when it was 2.91%.
The yield on the 30-year Treasury bond gained 12 basis points this week to 3.84%, which is its highest level since Aug. 12, when it was 3.95%.
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, increased three basis points this week to 4.90%. It is the highest weekly average for the yield to maturity since the week ended Aug. 19, when it was 4.95%.