| Thursday, October 26, 2017 | ||||||||
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 10/19/17 | .99 | 1.10 | 1.25 | 1.41 | 1.58 | 1.69 | 1.98 | 2.18 | 2.33 | 2.60 | 2.83 |
| 10/20/17 | .99 | 1.11 | 1.27 | 1.43 | 1.60 | 1.72 | 2.03 | 2.24 | 2.39 | 2.67 | 2.89 |
| 10/23/17 | 1.00 | 1.09 | 1.25 | 1.42 | 1.58 | 1.70 | 2.01 | 2.22 | 2.38 | 2.66 | 2.89 |
| 10/24/17 | 1.00 | 1.12 | 1.27 | 1.43 | 1.60 | 1.73 | 2.05 | 2.26 | 2.42 | 2.70 | 2.92 |
| 10/25/17 | 1.01 | 1.12 | 1.27 | 1.43 | 1.61 | 1.74 | 2.06 | 2.28 | 2.44 | 2.72 | 2.95 |
Source: U.S. Department of the Treasury, as of 10/25/17
A Warning from Moody’s Investor Service …
Municipal bond buyers might want to prefer higher coupon bonds, in order to avoid underperforming market valuations related to taxes on the accretion of discount prices, should interest rates rise.
In addition to trading-up in coupon, municipal investors might want to consider trading-up in credit quality, preferring debt securities from municipalities with a higher degree of underlying creditworthiness.
Earlier this year, Moody’s Investor Service warned that the “cultural taboo” around municipal bankruptcy is fading. In a June report, Moody’s analysts stated, “The political incentives for municipal bankruptcy may be shifting, particularly given the pattern of favorable outcomes for pensions.”
The report also stated, “One of the significant lessons of the recent large bankruptcies – and in particular, Detroit’s relatively speedy resolution of its filing – is that market access may not suffer for long after bankruptcy.”
Formerly bankrupt municipalities attempting to access the credit market at an affordable cost of capital have been benefited by credit rating upgrades from the rating companies. For example, Mammoth Lakes, California, which filed for bankruptcy protection in 2012, tapped the municipal market two weeks ago with a single “A” rating from S&P Global Ratings.
Hartford, Connecticut, the state’s capital city, might become the largest city since Detroit to use the courts for relief from its debt burden. The city has indicated it will seek authority to file for bankruptcy next month if the state does not pass a budget or provide additional aid.
The Moody's exhibit below details the municipal deafults from 1970 to 2016 for debt rated by Moody's Investor Service.
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
•Not FDIC Insured •No Bank Guarantee •May Lose Value