7/23/2021 Market Commentary
Municipal bond yields saw some movement during the course of the week, but landed Thursday evening not far off from where they started the week. Since last Friday, the 10-year MMD dropped by one basis point and the 30-year MMD increased by one basis point. Despite yields running in place, it was an active week in the market. The week started with a stock market selloff on Monday, caused largely by rising cases of the Delta variant of COVID-19 spooking equities investors. The selloff caused Treasury yields to hit five-month lows. While tax-exempt yields have been less sensitive to Treasury yield fluctuations in 2021, they were more reactive Monday, dropping by 3bps Monday across the curve.
Things settled down by Tuesday. The week saw an estimated $9 billion of municipal bond issuance come to market, above the $8.5 billion weekly average in 2021. The large supply did little to move tax-exempt yields Tuesday, as there was plenty of demand from buyers at the current yields. Municipal bond mutual funds had inflows of $1.7 billion during the week, which marks the 20th consecutive week of fund inflows. The summer months of July and August historically bring about investor reinvestment needs, and this pattern has continued in 2021. Despite the favorable fundamentals in the municipal market, the 10-year and 30-year MMD ticked back upwards Wednesday, bringing yields close to where they started the week.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| July 16, 2021 | 0.84% | 1.35% |
| July 22, 2021 | 0.83% | 1.36% |
| Change (bps) | -1 | +1 |
As mentioned earlier, Monday’s stock market selloff caused Treasury yields to hit five-month lows. The 10-year and 30-year Treasury yields ended the day Monday at 1.18% and 1.82%, respectively, down as much as 12 basis points from the Friday prior. The equities selloff was short-lived, as the stock market rebounded Tuesday and Wednesday. The rebound caused Treasury yields to return almost all of the gains made Monday. Treasury yields reversed course again on Thursday, when the CDC Director stated that some US hospitals were reaching capacity amid the recent surge in COVID-19 cases. Treasury yields ended the week 3-4 basis points lower than where they started.
Treasury yields over the past two weeks
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| July 16, 2021 | 1.30% | 1.94% |
| July 22, 2021 | 1.27% | 1.90% |
| Change (bps) | -3 | -4 |
Written by Dan Shaw, Oppenheimer & Co. Inc., Public Finance Associate.
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