Public Finance
05/10/2024 Market Commentary
May 10, 2024
Municipal bond yields drifted lower this week, after some weaker-than-expected jobs reports have investors once again hoping for a rate cut by late summer or early fall. Last Friday, the April Jobs Report showed that employers hired 175,000 workers during the month, falling short of the expected 240,000. Jobless claims also missed expectations, with jobless claims coming in at 231,000, the highest increase in six months. The reports show that the Fed’s aggressive rate-hiking campaign has begun to take its toll on the labor market. With a weaker labor market, investors are now more inclined to believe we will see rate cuts in 2024.
This week, municipal bond mutual funds saw their third consecutive week of inflows, with investors adding approximately $1.05 billion into municipal funds. This was the largest amount of inflows so far this year.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| May 3, 2024 | 2.75% | 3.86% |
| May 9, 2024 | 2.69% | 3.77% |
| Change (bps) | -6 | -9 |
Treasury yields have continued to rally ever since the May Federal Open Markets Committee meeting. Although the Fed decided to hold rates in place at that meeting, Fed Chairman Jerome Powell’s tone indicted that any future rate hikes were unlikely, and rate cuts remain a possibility. Powell’s press conference has sparked an interest in fixed income, and yields have come down as a result.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| May 3, 2024 | 4.50% | 4.66% |
| May 9, 2024 | 4.45% | 4.61% |
| Change (bps) | -5 | -5 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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