Public Finance
03/29/2024 Market Commentary
March 29, 2024
Municipals underperformed Treasuries this week as the market digested several large general obligation issuances, including $2.6 Billion from the State of California. The short end of the curve was especially under pressure with municipal yields rising by 7 to 17 basis points through Year 5. The approaching April 15th tax deadline has added additional pressure on yields, as people begin selling bonds to cover new tax liabilities.
The 10- and 30-Year MMD ended the week up by 4 and 3 basis points respectively. Muni-to-UST ratios rose with the 2-Year at 64%, 10-Year at 60%, and 30-Year at 85%.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| March 21, 2024 | 2.47% | 3.65% |
| March 28, 2024 | 2.51% | 3.68% |
| Change (bps) | +4 | +3 |
Treasury yields declined as investors monitored several economic reports released this week. On Wednesday, Fed Governor Waller spoke and stated that “there is no rush to cut the policy rate” right now and that it may be “appropriate to reduce the overall number of rate cuts or push them further into the future.” On Thursday, revised figures showed that that US Economy grew faster than previously estimated in the 4th quarter. The economy grew at an annualized rate of 3.4% and continues to benefit from robust consumer spending and a resilient labor market.
Though the market currently expects a rate cut in June, these remarks from Fed Governor Waller along with recent economic reports have led some investors to increase their bets that the first rate cut will not occur until July.
The February PCE report is due out on Friday. This report is the Fed’s preferred gauge of inflation and excludes the volatile food and energy categories. However, financial markets will be closed for the Good Friday holiday, so any market reaction to the news will not be seen until Monday.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| March 21, 2024 | 4.27% | 4.44% |
| March 28, 2024 | 4.20% | 4.34% |
| Change (bps) | -7 | -10 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
Disclaimer
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.
6514486.1