8/05/2022 Market Commentary
Municipal bond yields continued to decline this week as investors evaluated this week’s slew of better than expected economic data and corporate earnings reports. Recent data has somewhat eased concerns about a broader slowdown in the economy. In addition, municipal bond mutual funds experienced $1.1 billion in inflows. This was the largest inflow into municipal bond funds since the 1st week of June and the first time since January that we have seen inflows in back to back weeks.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| July 28, 2022 | 2.23% | 2.91% |
| August 4, 2022 | 2.18% | 2.85% |
| Change (bps) | -5 | -6 |
Treasury yields had rallied last week after Federal Reserve Chairman Jerome Powell signaled that the pace of future rate increases may slow later this year. However, the Federal Reserve has since signaled that the central bank is far from done with its tightening monetary policy and remains focused on fighting inflation which remains at a 40-year high. Investors are currently pricing in a 50% chance of a 75 basis point rate hike at the Federal Reserve’s next meeting in September.
Investors will now be eyeing the jobs report expected to be released Friday morning. Investors will be looking to see if the labor market can continue to withstand the recent rise in interest rates. Additionally, the US Treasury curve remains inverted with the 2-year rate now exceeding the 10-year rate by 35 basis points, the widest margin since the inversion appeared in early July.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| July 28, 2022 | 2.69% | 3.04% |
| August 4, 2022 | 2.68% | 2.97% |
| Change (bps) | -1 | -7 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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