Public Finance
02/09/2024 Market Commentary
February 09, 2024
A selloff in Treasuries that kicked off last Friday has pulled municipal bond yields up by 10 basis points along the curve. On Friday, the release of the January Jobs report shocked the market when the report showed that the economy added 353,000 jobs last month, double what was expected. The strong payroll number sparked a selloff in Treasuries. Municipal bonds outperformed Treasuries but still saw yields rise, with yield levels now back where they were at the end of January.
After four consecutive weeks of inflows into municipal bond mutual funds, outflows returned this week, with investors withdrawing $121 million out of muni funds. Supply picked up this week, with an estimated $7 billion sold in the primary market. Despite the uptick in supply, negative net supply is expected to continue into February.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| February 2, 2024 | 2.33% | 3.47% |
| February 8, 2024 | 2.43% | 3.57% |
| Change (bps) | +10 | +10 |
The sell-off in Treasuries occurred last Friday and into Monday, with the 10-year Treasury yield rising by 31 basis points over those two days. Initially fueled by the January Jobs report, the selloff was also impacted by Fed Chairman Powell’s statements made on CBS’s 60 minutes Sunday night. Powell doubled down on his stance that the Fed will wait on rate cutes until they are more confident that inflation is heading towards their 2% target. Friday’s Jobs report and Powell’s remarks has investors accepting the likelihood of later and fewer rate cuts in 2024.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| February 2, 2024 | 4.03% | 4.23% |
| February 8, 2024 | 4.17% | 4.37% |
| Change (bps) | +14 | +14 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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