Public Finance
3/31/2023 Market Commentary
March 31, 2023
Municipal bond yields saw very little movement this week. The supply of primary bond issuances has been slow, and the projected supply over the next 30 days looks to continue this trend. On the demand side, retail investors have become more active, especially on the short side of the curve. However, investors remain cautious. The recent failures of Silicon Valley Bank and Signature Bank caused a lot of uncertainty in the market.
This week, investors withdrew $194 million from municipal bond mutual funds, following last week’s $427 million outflows.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| March 24, 2023 | 2.29% | 3.35% |
| March 30, 2023 | 2.29% | 3.35% |
| Change (bps) | +0 | +0 |
Treasury yields increased this week, erasing much of the gains made in the prior weeks. On Monday, investor concerns began to calm after Citizens Bancshares said they would take on the deposits and loans of Silicon Valley Bank. This comes after New York Community Bancorp entered into an agreement last week to purchase all deposits and loans from Signature Bank, and UBS did the same with Credit Suisse. These purchases, along with the Federal Government’s response to back all deposits (even beyond the $250,000 limits) have provided investors with some comfort. This renewed investor confidence caused U.S. Treasury yields to jump on Monday. Much of the ‘flight-to-quality’ experienced the last two weeks was reversed.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| March 24, 2023 | 3.38% | 3.65% |
| March 30, 2023 | 3.56% | 3.78% |
| Change (bps) | +18 | +13 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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