Public Finance
05/31/2024 Market Commentary
May 31, 2024
Municipal bond yields continued to rise this week with both the 10- and 30-Year MMD reaching their highest levels since November of 2023. Much of the selloff has been described as a market correction, resulting from historically low rates compared to the Treasury market. Although the recent rise in rates have led to an improvement in Muni-to-UST ratios, ratios are still considered rich compared to their historical averages.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| May 23, 2024 | 3.01% | 3.87% |
| May 30, 2024 | 3.12% | 3.96% |
| Change (bps) | +11 | +9 |
Economic data released this week showed that the U.S. economy grew more slowly in the first quarter than previously estimated. Economic growth was revised downward from 1.6% to 1.3%. Treasury yields dropped on the news, but still ended the week higher overall with the 10- and 30-Year Treasury up by 8 and 11 basis points respectively. Investors are hopeful that slowing economic growth could increase the odds for more rate cuts later in the year. Currently the market is expecting just one rate cut this year, with the November meeting being the most likely.
Looking forward, investors will be waiting for the release of the April PCE inflation report due out on Friday where economists currently expect to see an annualized increase of 2.7%. If the inflation reading comes in hotter than expected, we are likely to see interest rates continue to rise in the near term.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| May 23, 2024 | 4.47% | 4.58% |
| May 30, 2024 | 4.55% | 4.69% |
| Change (bps) | +8 | +11 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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