Public Finance
02/23/2024 Market Commentary
February 23, 2024
Municipal bonds yields held steady in the week following the President’s Day Holiday. Favorable fundamentals are at play, specifically a low supply of bonds coming to market and sufficient demand have tax-exempt yields currently pinned in place. The supply-demand imbalance has tax-exempt yields ignoring recent movement in Treasury yields. As a result, muni-Treasury ratios in years 2 – 10 are near three-year lows, with the 2-year muni-Treasury ratio currently at 58% and the 10-year muni-Treasury ratio at 57%.
Supply is expected to increase in the coming weeks, which may cause some rate volatility in tax-exempt yields. Historically, bond volume picks up in the Spring.
Municipal bond mutual founds had their third consecutive week of outflows, with investors withdrawing $11.4 million from muni funds this week.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| February 16, 2024 | 2.46% | 3.59% |
| February 22, 2024 | 2.46% | 3.59% |
| Change (bps) | +0 | +0 |
Treasury yields saw more movement this week, but ended up only slightly higher than where they were last Friday. On Wednesday, the January Federal Open Market Committee meeting minutes were released, which didn’t provide too many surprises. Analysts have given up on the possibility of a rate cut at the March FOMC meeting, and are now expecting the first rate cuts to occur in June or July.
Treasury yields over the past week
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| February 16, 2024 | 4.30% | 4.45% |
| February 22, 2024 | 4.32% | 4.46% |
| Change (bps) | +2 | +1 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
Disclaimer
All materials, including proposed terms and conditions, are indicative and for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation and will be evidenced by a formal agreement. Opinions expressed are our present opinions only and are subject to change without further notice. The information contained herein is confidential. By accepting this information, the recipient agrees that it will, and it will cause its directors, partners, officers, employees and representatives to use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is prohibited. Except in so far as required to do so to comply with applicable law or regulation, express or implied, no warranty whatsoever, including but not limited to, warranties as to quality, accuracy, performance, timeliness, continued availability or completeness of any information contained herein is made. Opinions expressed herein are current opinions only as of the date indicated. Any historical price(s) or value(s) are also only as of the date indicated. We are under no obligation to update opinions or other information.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. Oppenheimer does not provide accounting, tax or legal advice; however, you should be aware that any proposed indicative transaction could have accounting, tax, legal or other implications that should be discussed with your advisors and or counsel. The materials should not be relied upon for the maintenance of your books and records or for any tax, accounting, legal or other purposes. In addition, we mutually agree that, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Oppenheimer imposing any limitation of any kind.
Oppenheimer shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the data or formulae provided herein or for any other aspect of the performance of this material. In no event will Oppenheimer be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data provided herein or this material, even if Oppenheimer has been advised of the possibility of such damages. Oppenheimer will have no responsibility to inform the user of any difficulties experienced by Oppenheimer or third parties with respect to the use of the material or to take any action in connection therewith. The fact that Oppenheimer has made the materials or any other materials available to you constitutes neither a recommendation that you enter into or maintain a particular transaction or position nor a representation that any transaction is suitable or appropriate for you.
© 2024 Oppenheimer & Co. Inc. Transacts Business on All Principal Exchanges and Member SIPC. All rights reserved. No part of this presentation may be reproduced in any manner without the written permission of Oppenheimer. Oppenheimer & Co. Inc., including any of its affiliates, officers or employees, does not provide legal or tax advice. Investors should consult with their tax advisor regarding the suitability of Municipal Securities in their portfolio.
6422929.1