Public Finance
11/03/2023 Market Commentary
November 03, 2023
Municipal bond yields fell this week with the 10 and 30-year MMD dropping by 15 and 12 basis points, respectively. The drop in rates mostly came on Thursday, as the market reacted to Wednesday’s Fed meeting and a labor market that appears to be showing its first signs of softening. The Fed held off on raising rates this month, as expected. After the Fed meeting, Fed Chairman Jerome Powell stated that he was unsure if any future rate hikes were needed in order to bring inflation down to the Fed’s target goal of 2%. The Fed will rely on the data in future months in order to make that decision. The market rallied on the possibility that the Fed could be done raising rates.
Municipal bond funds saw their highest outflows since April with $1.493 billion, marking the ninth consecutive week of outflows.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| October 26, 2023 | 3.59% | 4.57% |
| November 2, 2023 | 3.44% | 4.45% |
| Change (bps) | -15 | -12 |
Treasury yields declined on Thursday as well. Yields were impacted by a Jobless Claims Report that increased slightly by 5,000 to 217,000. This came in higher than the forecasted 210,000. The data is the first sign that the Fed’s historic rate hike campaign could be working to slow what had been a stubbornly robust jobs market. A slowing labor market has been eyed by the Fed as the key to pulling back on inflation. Investors took this indication of a softening market as a sign that the Fed might continue to hold off on another rate hike at the December meeting.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| October 26, 2023 | 4.85% | 5.00% |
| November 2, 2023 | 4.68% | 4.82% |
| Change (bps) | -17 | -18 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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