Public Finance
05/24/2024 Market Commentary
May 24, 2024
Municipal bond yields rose sharply this week with the short end of the curve experiencing the most pressure. The 10-year MMD ended the week up by 26 basis points, reaching its highest level of the year. The municipal market has been facing pressure from elevated supply, continued outflows from municipal bond funds, and historically low Muni-to-UST ratios. However, the rise in rates this week have offered somewhat of a correction as Muni-to-UST ratios ended the week at 67% for years 3, 5, and 10.
This week also saw investors pull $217 million from municipal bond funds. This follows last week’s outflows of $548 million.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| May 16, 2024 | 2.75% | 3.76% |
| May 23, 2024 | 3.01% | 3.87% |
| Change (bps) | +26 | +11 |
Economic data released this week pointed to an economy that continues to outperform expectations. Services and manufacturing data for May exceeded forecasts and showed that both sectors are still expanding. Additionally, jobless claims numbers for the week came in lower than expected. The stronger than expected economic data contributed to increased speculation about the Federal Reserve’s rate cut plans this year. Treasury yields rose as a result with the 10- and 30-year Treasury ending the week up by 9 and 6 basis points respectively.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| May 16, 2024 | 4.38% | 4.52% |
| May 23, 2024 | 4.47% | 4.58% |
| Change (bps) | +9 | +6 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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