5/14/2021 Market Commentary
Like most financial markets, the municipal bond market was strongly affected by the April Consumer Price Index report that was released on Wednesday. The report showed that U.S. consumer prices in April rose 4.2% over the past 12 months, which exceeded economists’ 3.6% increase expectations. On a month-to-month basis, prices increase 0.8%, beating expectations of 0.2%. The higher-than-expected April CPI print increased inflation fears among investors, which led to a sell-off in Treasuries. Tax-exempt yields could not evade the rising Treasury yields, and were pulled up by the rising interest rate environment, despite another week of strong inflows into municipal bond mutual funds. Inflows over the week reached $750 million, beating last week’s mark of $584 million.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| May 7, 2021 | 0.97% | 1.55% |
| May 14, 2021 | 1.02% | 1.60% |
| Change (bps) | +5 | +5 |
Treasury yields rose during the week, as inflation concerns spiked after the release of the April CPI report. The report showed that the annual headline CPI rate was the fastest since September 2008. The fears of inflation caused Treasuries to sell off, bringing the 30-year Treasury yield up 12 basis points during the week.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| May 7, 2021 | 1.58% | 2.28% |
| May 14, 2021 | 1.66% | 2.40% |
| Change (bps) | +8 | +12 |
Written by Dan Shaw, Oppenheimer & Co. Inc., Public Finance Associate.
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