| Friday, July 14, 2023 |
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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 |
| 07/07/23 | 5.24 | 5.36 | 5.48 | 5.41 | 4.94 | 4.67 | 4.36 | 4.23 | 4.07 | 4.27 | 4.05 |
| 07/10/23 | 5.27 | 5.37 | 5.49 | 5.39 | 4.86 | 4.55 | 4.24 | 4.13 | 4.00 | 4.24 | 4.03 |
| 07/11/23 | 5.27 | 5.40 | 5.51 | 5.40 | 4.88 | 4.55 | 4.23 | 4.11 | 3.97 | 4.22 | 4.01 |
| 07/12/23 | 5.25 | 5.39 | 5.48 | 5.34 | 4.75 | 4.38 | 4.07 | 3.98 | 3.86 | 4.14 | 3.95 |
| 07/13/23 | 5.25 | 5.39 | 5.46 | 5.27 | 4.64 | 4.25 | 3.95 | 3.87 | 3.77 | 4.07 | 3.90 |
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 7/13/2023
A Municipal Trader's Perspective
Better-than-expected inflation data over the last few days has driven bond prices higher as the odds increased that a Fed hike on July 26 could be the last for quite some time. In just over one week, the two-year Treasury yield has dropped from 4.99 to 4.67 and the ten-year from 4.07 to 3.78.
The municipal market had a strong performance this week as well despite a heavier slate of new issue supply. Demand from separately managed accounts and mutual funds has continued to surpass supply, keeping municipal prices strong particularly in the 1-10-year sector. We still view the liquidation of short-term municipals as a viable funding source if you are seeking liquidity. Medium to high grade credits maturing 10 years and in with coupons of at least 3.00% are being bid at net yields below 3.50% in many cases. For a C-Corp, this equates to a taxable equivalent give-up yield of 4.43 or less, currently a very reasonable funding level.
On the other end of the spectrum, for 10-year maturities and beyond, the municipal yield curve steepens much more dramatically than the USTN curve. As shown in the graph below, you can pick up 86 basis points by extending from 10 to 20 years on a typical AA municipal bond, while the slope of the Treasury curve is far flatter, a difference of just 30 basis points from 10 to 20 years. This fact combined with the broad assumption that we may be nearing a peak in this rate cycle points to historically good value in 15-20-year municipals.
Consider, for example, this Missouri School District General Obligation Bond yielding 4.00% tax-free, equating to a 5.51% taxable equivalent yield for an S-Corp:
The municipal market had a strong performance this week as well despite a heavier slate of new issue supply. Demand from separately managed accounts and mutual funds has continued to surpass supply, keeping municipal prices strong particularly in the 1-10-year sector. We still view the liquidation of short-term municipals as a viable funding source if you are seeking liquidity. Medium to high grade credits maturing 10 years and in with coupons of at least 3.00% are being bid at net yields below 3.50% in many cases. For a C-Corp, this equates to a taxable equivalent give-up yield of 4.43 or less, currently a very reasonable funding level.
On the other end of the spectrum, for 10-year maturities and beyond, the municipal yield curve steepens much more dramatically than the USTN curve. As shown in the graph below, you can pick up 86 basis points by extending from 10 to 20 years on a typical AA municipal bond, while the slope of the Treasury curve is far flatter, a difference of just 30 basis points from 10 to 20 years. This fact combined with the broad assumption that we may be nearing a peak in this rate cycle points to historically good value in 15-20-year municipals.
Consider, for example, this Missouri School District General Obligation Bond yielding 4.00% tax-free, equating to a 5.51% taxable equivalent yield for an S-Corp:
Whether your goal is to raise liquidity or you see opportunity in booking tax-free yields at or near 4.00%, we hope to help. Have a safe weekend and try to stay cool
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