Public Finance
3/24/2023 Market Commentary
March 24, 2023
Municipal bond took a bit of a breather this week after last week’s mayhem. The muni market was in ‘wait and see’ mode in the day’s leading up to the March Federal Open Markets Committee meeting, with yields hardly moving. Yields continued to hold even after the Fed’s announcement of a 25 basis point hike on Wednesday.
Bond supply was low this week due to the FOMC meeting, with issuance estimated at just over $4 billion. Demand dipped as well, with municipal bond mutual funds seeing approximately $460 million withdrawn during the week.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| March 17, 2023 | 2.38% | 3.42% |
| March 23, 2023 | 2.36% | 3.42% |
| Change (bps) | -2 | +0 |
Treasury yields ran in place this week for much of the curve. Yields drifted higher in the days leading up to the FOMC meeting, but came back down after Fed Chairman Powell’s press conference. Powell announced another 25 basis point rate hike, and promised to stay aggressive in the fight against inflation, even with the instability that has occurred in the banking sector. Despite the rate hike and hawkish remarks, Treasury yields rallied, as many investors believe the Fed is finishing hiking rates, and that cuts could occur as soon as this summer.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| March 17, 2023 | 3.41% | 3.60% |
| March 23, 2023 | 3425% | 3.69% |
| Change (bps) | +1 | +9 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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