5/7/2021 Market Commentary
Tax-exempt bond yields on the long end edged slightly lower during the week, with the 30-year MMD dropping two basis points. The 10-year MMD continued to flirt with the 1% mark, but ultimately ended where the week began, at 0.99%. Continued strong demand for municipal bonds have held tax-exempt yields in place. Inflows into municipal bond mutual funds came in at $585 million for the week. While this is the first time since March in which inflows have fallen below $1 billion, analysts believe the drop in inflows is not a sign of a new trend, but rather simply a sign that investors are holding on to cash to pay their tax bills due next week. Rumors of higher taxes on top earners continued to come out of Washington, which indicates that the demand for tax-exempt bonds will likely remain high.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| April 30, 2021 | 0.99% | 1.59% |
| May 6, 2021 | 0.99% | 1.57% |
| Change (bps) | +0 | -2 |
Treasury yields decreased just about every day during the week. Positive economic data reports have continued to hit headlines; for example it was reported Thursday that applications for U.S. state unemployment insurance fell last week to a pandemic low. Treasury yields have not jumped at these signs of economic growth as they did in February and March. They have stayed put, and even decreased slightly.
During the week, Federal Reserve officials backed Chairman Powell’s recent remarks that the economy has a long way to go before it reaches a full economic recovery. These statements have eased investors’ concerns of the Fed tapering spending, and in turn kept Treasury yields low.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| April 30, 2021 | 1.64% | 2.31% |
| May 6, 2021 | 1.56% | 2.24% |
| Change (bps) | -8 | -7 |
Written by Dan Shaw, Oppenheimer & Co. Inc., Public Finance Associate.
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