| Friday, November 8, 2024 |
||||||||
|---|---|---|---|---|---|---|---|---|
|
MANAGING DIRECTOR: |
||||||||
|
US Treasury Market |
|||||||||||
| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 11/01/24 | 4.64 | 4.52 | 4.44 | 4.27 | 4.21 | 4.19 | 4.23 | 4.31 | 4.39 | 4.70 | 4.58 |
| 11/04/24 | 4.63 | 4.53 | 4.42 | 4.25 | 4.16 | 4.14 | 4.15 | 4.22 | 4.29 | 4.58 | 4.47 |
| 11/05/24 | 4.61 | 4.54 | 4.42 | 4.25 | 4.18 | 4.14 | 4.15 | 4.21 | 4.27 | 4.56 | 4.44 |
| 11/06/24 | 4.57 | 4.54 | 4.44 | 4.32 | 4.26 | 4.23 | 4.28 | 4.37 | 4.43 | 4.71 | 4.61 |
| 11/07/24 | 4.57 | 4.54 | 4.42 | 4.27 | 4.20 | 4.16 | 4.17 | 4.25 | 4.33 | 4.63 | 4.53 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 11/07/2024.
The Impact of a new President on Municipals
Donald Trump will be the 47th President of the US, and only the second to win a second term after losing the election after his first. The other was Grover Cleveland, the first Democrat elected after the Civil War.
The assumption going forward in terms of what to anticipate from Washington DC includes an extension of the 2017 tax cuts as well as a push to lower corporate tax rates. Efforts to reduce immigration as well as increase specific tariffs on China, Mexico, Canada, and the EU are also likely to quickly emerge in 2025.
So how does this impact the performance of municipals? We can use 2016 as a reference point, although there are some important differences to consider in the current environment. In 2016, after Trump’s election the yield on the 10-year U.S. Treasury bond rose from 1.80% to 2.44% by year-end, reflecting a 64 basis point (bps) increase. At that time, municipal bonds moved largely in tandem with Treasuries, trading at or near 100% of Treasury yields. While we might expect similar dynamics in the current cycle, we are in a much higher rate environment now – generic municipal 10 year and 30-year levels sit at their highest point in a year (3.10 and 4.00). Longer term considerations for Municipals include:
· Tax ramifications likely stay neutral to current conditions. The Tax Act of 2017 is due to expire at the end of 2025, but the 37% top federal rate and 21% corporate rate are expected to be part of the conversation for revision by Administration. Municipals as an asset class would continue to hold value on a taxable equivalent basis.
· Bloomberg reported $80 billion in ballot initiatives was being voted on across the country related to school debt. Overall, the ballot total exceeded $140 billion as reported by The Bond Buyer. Elevated supply next year could lead to higher rates and higher muni/trsy ratios.
10 year treasury yields 2016
10 Year AAA Bloomberg Bval Municipal yields 2016
Bloomberg AAA Bval Municipal yield as a percent of treasuries 2016
Sources: Bloomberg and The Bond Buyer
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