Mu­nis Strong; Stocks Have Worst Christ­mas Eve Since ‘33

The Bond Buyer - - Market News - By Chip Barnett

Mu­nic­i­pal bonds were stronger on Mon­day as Christ­mas week kicked off with more volatil­ity in the eq­uity mar­ket. The Dow Jones In­dus­trial Av­er­age and S&P 500 In­dex suf­fered their worst Christ­mas Eve losses since 1933, ac­cord­ing to data cited by Mar­ketWatch. Stock in­dexes over­all fell to their low­est lev­els since April 2017 and pushed up Trea­sury and muni bonds.

Fi­nan­cial mar­kets closed down early ahead of the hol­i­day. There are no muni bonds slated for sale this week, with the new is­sue cal­en­dar as bare as Old Mother Hub­bard’s cup­board.

Mu­nic­i­pal bonds were stronger on Mon­day, ac­cord­ing to a read of the MBIS bench­mark scale. Bench­mark muni yields fell as much as two ba­sis points in the oneto 30-year ma­tu­ri­ties.

High-grade mu­nis were also stronger, with yields cal­cu­lated on MBIS’ AAA scale drop­ping as much as two ba­sis points across the curve.

Mu­nic­i­pals were steady on Mu­nic­i­pal Mar­ket Data’s

AAA bench­mark scale, which showed the yield on both the 10-year muni gen­eral obli­ga­tion and the 30-year muni ma­tu­rity re­main­ing un­changed.

Trea­sury bonds were stronger amid con­tin­u­ing stock mar­ket weak­ness. The Trea­sury 30-year was yield­ing 3.004%, the 10-year yield stood at 2.755%, the five-year was at 2.591%, the two-year was at 2.595% while the Trea­sury three-month bill stood at 2.386%.

“Over the week­end, Pres­i­dent Trump was talk­ing about fir­ing Fed­eral Re­serve Chair­man Jerome Pow­ell ac­cord­ing to re­ports,” ICE Data Ser­vices said in a Mon­day mar­ket com­ment. “The Fed raised rates two weeks ago bring­ing the Fed Funds rate to just be­low neu­tral. As a re­sult, eq­uity mar­kets have dropped into cor­rec­tion ter­ri­tory, end­ing the long­est bull run in his­tory for the S&P 500.”

On Sun­day, Trea­sury Sec­re­tary Mnuchin called the CEOs of the na­tion’s six largest banks, who told him that they have am­ple liq­uid­ity avail­able for lend­ing to con­sumer, busi­ness mar­kets, and all other mar­ket op­er­a­tions. On Mon­day, he was hold­ing a call with the Pres­i­dent’s Work­ing Group on fi­nan­cial mar­kets, which in­cludes the the Fed­eral Re­serve Board of Gov­er­nors, the Se­cu­ri­ties and Ex­change Com­mis­sion and the Com­modi­ties Fu­tures Trad­ing Com­mis­sion to dis­cuss ef­forts to as­sure nor­mal mar­ket op­er­a­tions.

“We con­tinue to see strong eco­nomic growth in the U.S. econ­omy with ro­bust ac­tiv­ity from con­sumers and busi­ness,” Mnuchin said in a press re­lease. “With the govern­ment shut­down, Trea­sury will have crit­i­cal em­ploy­ees to main­tain its core op­er­a­tions at Fis­cal Ser­vices, IRS, and other crit­i­cal func­tions within the depart­ment.”

On Mon­day, the 10-year muni-to-Trea­sury ra­tio was cal­cu­lated at 83.8% while the 30-year muni-to-Trea­sury ra­tio stood at 100.9%, ac­cord­ing to MMD. The muni-to-Trea­sury ra­tio com­pares the yield of tax-ex­empt mu­nic­i­pal bonds with the yield of tax­able U.S. Trea­sury with com­pa­ra­ble ma­tu­ri­ties. If the muni/Trea­sury ra­tio is above 100%, mu­nis are yield­ing more than Trea­sury; if it is be­low 100%, mu­nis are yield­ing less.


The Mu­nic­i­pal Se­cu­ri­ties Rule­mak­ing Board re­ported 37,553 trades on Fri­day on vol­ume of $9.59 bil­lion.

Cal­i­for­nia, New York and Texas were the mu­nic­i­pal­i­ties with the most trades, with the Golden State tak­ing 17.302% of the mar­ket, the Em­pire State tak­ing 13.382% and the Lone Star State tak­ing 9.398%.

Rev­enue bonds com­prised 56.83% of to­tal new is­suance in the week ended Dec. 21, ac­cord­ing to Markit with gen­eral obli­ga­tion bonds mak­ing up 38.19% and tax­able bonds ac­count­ing for 4.98%.

Some of the most ac­tively traded mu­nis by type in the week were from New York, Texas and Puerto Rico is­suers, ac­cord­ing to Markit.

In the GO bond sec­tor, the Suf­folk County, N.Y., 5s of 2019 traded 99 times. In the rev­enue bond sec­tor, the Texas 4s of 2019 traded 41 times. And in the tax­able bond sec­tor, the Puerto Rico Govern­ment Devel­op­ment Bank Re­cov­ery Author­ity 7.5s of 2040 traded 14 times.names were among the most ac­tively quoted bonds in the week ended Dec. 21, ac­cord­ing to Markit. ◽

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