PublicFinance
1/27/2023 Market Commentary
January 27, 2023
Municipal bond yields saw little movement this week, with the 10-year MMD falling by two basis points and the 30-year MMD holding in place. It has been a positive start to the year for municipals, which have dropped by approximately 40 basis points along the yield curve. The drop in rates has been caused by falling Treasury yields, and a supply-demand imbalance in the municipal market.
Demand for municipal bonds continues to rise. This week, investors added another $1.27 billion into municipal bond mutual funds, marking the third consecutive week of cash inflows into municipal funds.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| January 20, 2023 | 2.21% | 3.18% |
| January 26, 2023 | 2.19% | 3.18% |
| Change (bps) | -2 | +0 |
Treasury yields held steady for the most part this week. The largest increase occurred Thursday, when the 10-year Treasury yield increased a few basis points after the 2022 4th Quarter GDP report came in slightly better than expected. Like municipal yields, Treasury yields have dropped significantly in the first four weeks of the year. The Treasury market is betting that the Federal Reserve Board will begin reducing the Federal Funds rate by the end of the year, despite Fed Officials consistently emphasizing their intent to keep the Fed Funds rate above 5%.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| January 20, 2023 | 3.48% | 3.65% |
| January 26, 2023 | 3.50% | 3.62% |
| Change (bps) | +2 | -3 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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