| Friday, November 10, 2023 |
||||||||
|---|---|---|---|---|---|---|---|---|
|
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 |
| 11/03/23 | 5.38 | 5.41 | 5.47 | 5.28 | 4.84 | 4.64 | 4.50 | 4.56 | 4.57 | 4.94 | 4.77 |
| 11/06/23 | 5.39 | 5.42 | 5.48 | 5.33 | 4.94 | 4.73 | 4.59 | 4.64 | 4.64 | 4.99 | 4.81 |
| 11/07/23 | 5.39 | 5.43 | 5.49 | 5.33 | 4.92 | 4.69 | 4.54 | 4.58 | 4.57 | 4.91 | 4.73 |
| 11/08/23 | 5.38 | 5.43 | 5.49 | 5.34 | 4.93 | 4.68 | 4.51 | 4.53 | 4.49 | 4.81 | 4.62 |
| 11/09/23 | 5.39 | 5.43 | 5.48 | 5.38 | 5.02 | 4.79 | 4.64 | 4.67 | 4.63 | 4.96 | 4.77 |
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 11/09/2023.
A Municipal Trader’s Perspective
Until yesterday, the bond bulls were out in full force this month, driving the 10-year Treasury yield down over 40 basis points to just below a 4.50%. But a mediocre 10-year Auction Wednesday and a poor 30-year Auction yesterday coupled with some less than dovish remarks from Chair Powell contributed to a modest sell-off, backing the 10-year yield off to as high as a 4.63. Swap traders raised their odds of a hike in December very slightly but are still pricing in a negligible chance.
While FOMC actions are often the principal driver of all fixed income markets, it’s worth noting that the municipal market can sometimes be driven by its own technical factors. So far this year, municipal issuance is down roughly 25% from the peak issuance years in 2020 and 2021, and new issue supply is expected to remain relatively light in November and December as holiday weeks and FOMC announcement week are not favored times to come to market. Especially if funds see increased inflows, municipals are expected to outperform Treasuries the remainder of this year, causing relative values to drop.
Based upon historical ratios, we currently view tax-exempt yields as a very good value 15 years and beyond at 87% or better of the corresponding taxable Treasury yields. High quality tax-free bonds are still attainable at 4.00% or better in the 15 to 20-year range, but this may not last if we have indeed seen the peak in yields for this cycle.
Consider this new issue bank qualified Kansas municipal that was priced competitively this week, and note the current ratio of AA municipal yields to Treasuries in the graph below:
*Assumes Sub-S Bank with 2% Cost of Funds / Indication only, subject to change and availability without notice
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