Public Finance
4/07/2023 Market Commentary
April 07, 2023
Municipal bond yields declined this week as recent jobs numbers have increased fear among investors about a possible recession. The 10- and 30- Year MMD have dropped by 17 and 15 basis points respectively.
The Municipal bond market continues to benefit from an overall lack of supply. Municipal bond volume declined 30% in March on a year-over-year basis, continuing a trend that we have seen through the first quarter of the year. This supply and demand imbalance has contributed to rich Muni-UST ratios on the short end of the curve. Muni-UST ratios are at 60% in year 2, 62% in year 5, and 64% in year 10.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| March 30, 2023 | 2.27% | 3.33% |
| April 6, 2023 | 2.10% | 3.18% |
| Change (bps) | -17 | -15 |
Treasury yields rallied this week in response to the weaker than expected jobs numbers. Job openings fell below 10 million in February for the first time since May of 2021. Additionally, weekly jobless claims numbers came in higher than expected. Investors have interpreted these reports as evidence that interest rate hikes may finally be impacting the labor market. These reports have also added to market speculation that the Federal Reserve may take a pause in hiking interest rates at their next board meeting in May. Investors will be closely monitoring the March jobs numbers due out on Friday.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| March 30, 2023 | 3.55% | 3.74% |
| April 6, 2023 | 3.30% | 3.54% |
| Change (bps) | -25 | -20 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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