5/28/2021 Market Commentary
- May 28, 2021
Short-term municipal bond yields remained calm during the week, however the long-end of the curve saw some more movement with the 30-year MMD decreasing by 5 basis points. The $7 billion of municipal bonds that entered the market this week were met with strong demand. The municipal bond market continues to see the demand for municipal bonds outweigh the supply coming to market, and the imbalance has been essential in holding tax-exempt yields low. The concern of a tax increase on top earners has pushed demand for tax-exempt bonds extraordinarily high. This week municipal bond mutual funds saw inflows of $1.466 billion, extending the streak of net inflows to 12 weeks.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| May 21, 2021 | 1.01% | 1.57% |
| May 27, 2021 | 1.00% | 1.52% |
| Change (bps) | -1 | -5 |
With May coming to a close, we can see that municipal bond issuance during the month finished at $23.77 billion, which is 23% lower than the $30.99 billion brought to market in May 2020. While the year-over-year drop in supply looks staggering, we have to remember that the market in May of 2020 was very abnormal. Last year, the initial COVID-19 lockdowns disrupted the market in March and April and resulted in an uptick of supply in May. Although municipal issuance this month is substantially lower than May of last year, issuance so far in 2021 stands at $169 billion, ahead of the $158 billion issued at this point last year.
Treasury yields dipped early in the week due to a weaker-than-expected Consumer Confidence report and dovish comments from a Federal Reserve Board official that stated he believed any rise in inflation would be temporary. Treasury yields rose on Thursday, as jobless claims came in lower than expected for the week. Additionally, it was reported that President Biden plans to propose a $6 trillion budget on Friday, pulling yields higher into the afternoon.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| May 21, 2021 | 1.63% | 2.33% |
| May 27, 2021 | 1.61% | 2.29% |
| Change (bps) | -2 | -4 |
Written by Dan Shaw, Oppenheimer & Co. Inc., Public Finance Associate.
Rick Brandis
Title:Managing Director
Nicki Tallman
Title:Managing Director
Disclaimer
All materials, including proposed terms and conditions, are indicative and for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation and will be evidenced by a formal agreement. Opinions expressed are our present opinions only and are subject to change without further notice. The information contained herein is confidential. By accepting this information, the recipient agrees that it will, and it will cause its directors, partners, officers, employees and representatives to use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is prohibited. Except in so far as required to do so to comply with applicable law or regulation, express or implied, no warranty whatsoever, including but not limited to, warranties as to quality, accuracy, performance, timeliness, continued availability or completeness of any information contained herein is made. Opinions expressed herein are current opinions only as of the date indicated. Any historical price(s) or value(s) are also only as of the date indicated. We are under no obligation to update opinions or other information.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. Oppenheimer does not provide accounting, tax or legal advice; however, you should be aware that any proposed indicative transaction could have accounting, tax, legal or other implications that should be discussed with your advisors and or counsel. The materials should not be relied upon for the maintenance of your books and records or for any tax, accounting, legal or other purposes. In addition, we mutually agree that, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Oppenheimer imposing any limitation of any kind.
Oppenheimer shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the data or formulae provided herein or for any other aspect of the performance of this material. In no event will Oppenheimer be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data provided herein or this material, even if Oppenheimer has been advised of the possibility of such damages. Oppenheimer will have no responsibility to inform the user of any difficulties experienced by Oppenheimer or third parties with respect to the use of the material or to take any action in connection therewith. The fact that Oppenheimer has made the materials or any other materials available to you constitutes neither a recommendation that you enter into or maintain a particular transaction or position nor a representation that any transaction is suitable or appropriate for you.
© 2021 Oppenheimer & Co. Inc. Transacts Business on All Principal Exchanges and Member SIPC. All rights reserved. No part of this presentation may be reproduced in any manner without the written permission of Oppenheimer. Oppenheimer & Co. Inc., including any of its affiliates, officers or employees, does not provide legal or tax advice. Investors should consult with their tax advisor regarding the suitability of Municipal Securities in their portfolio.