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3/26/2021 Market Commentary

  • Oppenheimer & Co. Inc.
  • March 26, 2021
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municipal bond yields

Tax-exempt municipal bond yields trended lower over the past few days as a result of increased demand in recent weeks. Inflows into municipal bond mutual funds have been very strong recently, breaching the $1 billion mark in each of the past two weeks. These large inflows were put to work this week, buying up the $10 billion new issue municipal bond supply with ease and pushing yields lower. Inflows into municipal bond funds during the current week were smaller than the past two weeks, but still significant at $592 million. As of Thursday, the 10-year and 30-year MMD each dropped 5 basis points over the course of the week.

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Tax-exempt yields over the past week
  10-Year MMD 30-Year MMD
March 19, 2021 1.16% 1.79%
March 25, 2021 1.11% 1.74%
Change (bps) -5 -5

Treasury yields decreased each day this week, a rare occurrence in 2021. Treasury yields have been rising for most of the year due to increased fiscal spending from the Biden Administration and optimism surrounding the COVID-19 vaccine rollout. This week the COVID-19 recovery effort had some hiccups. COVID-19 infection rates have spiked in certain regions of the world, with some countries such as France and Germany extending their lockdowns. Treasury yields retreated at the news that the pandemic recovery may not be as smooth as it was thought to be a few weeks ago.

Treasury yields over the past week
  10-Year Treasury 30-Year Treasury
March 19, 2021 1.73% 2.45%
March 25, 2021 1.62% 2.34%
Change (bps) -11 -11

On Wednesday, Fed Chairman Jerome Powell testified along with Treasury Secretary Janet Yellen before the House Committee on Financial Services regarding the CARES Act. During Powell’s prepared statement, he echoed his previous remarks that the economic recovery was far from complete, but that it has progressed more quickly than expected. He also mentioned that certain sectors hit hardest by the pandemic remain weak, and unemployment remains high.

Written by Dan Shaw, Oppenheimer & Co. Inc., Public Finance Associate.


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