Public Finance
11/17/2023 Market Commentary
November 17, 2023
Municipal bonds rallied this week, due in large part by the release of the October Consumer Price Index Report which showed inflation has slowed down to 3.2% year-over-year. Core CPI, which excludes volatile food and energy prices, slowed to 4% year-over-year, which marks the smallest increase since September 2021. The better-than-expected report has led investors to believe that the Fed’s rate hiking campaign is beginning to take its intended effect on the market, and the market is now hoping the Fed will not need to enact any future rate hikes.
MMD yields fell as a result, with the 10-year MMD down 15 basis points since last Friday. Municipal bond mutual funds saw another week of outflows, with investors pulling roughly $235 million from municipal funds. This marks the 11th consecutive week of outflows from municipal bond funds.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| November 9, 2023 | 3.20% | 4.22% |
| November 16, 2023 | 3.05% | 4.09% |
| Change (bps) | -15 | -13 |
Treasury yields also rallied after the release of the October CPI Report, but saw more volatility this week than Tax Exempt bonds. Ultimately, Treasury yields ended the week lower than where they started, with the 10-year Treasury now 19 basis points lower than its position last Friday.
In addition to the CPI Report, the weekly jobless claims report affected yields. A report released Thursday showed initial claims for state unemployment benefits rose by 13,000, the highest since August. The data reinforces the concept that the Fed’s previous rate hikes are continuing to impact the labor market.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| November 9, 2023 | 4.63% | 4.78% |
| November 16, 2023 | 4.44% | 4.62% |
| Change (bps) | -19 | -16 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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