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Treasury, Muni Markets Remain Quiet
Treasuries ended relatively flat after weeks of volatility. Market concerns
remain focused on inflation, but bearish reports about investor confidence,
housing and jobs are keeping interest rates down. On June 6, yields on the
2-year note closed at 2.37%. The 10-year note lingered around 4%, then closed
at 3.91% after news of the steepest rise in unemployment in more than 20 years,
with the economy losing jobs for the fifth straight month. Meanwhile, the
30-year bond closed at 4.62%. Fed Futures indicate a 62% chance the central
bank will increase its benchmark rate by yearend.
Tax-exempt rates continue to move along with Treasuries in a fairly quiet
market. Primary new issuance continues to be manageable and well received, and
absolute yields remain relatively attractive. Although liquidity in the market
has improved significantly, secondary municipal trading shows the market still
lacks full efficiency. Investors continue to discredit most insurers and focus
on underlying credits. Standard & Poor’s downgraded AMBAC and MBIA two
notches to AA last week. We expect the market for high-grade Munis to continue
consolidating as crossover buyers and retail continue to create sufficient
demand for municipal paper, though a possible surge in supply from investors
selling paper insured by AMBAC and MBIA could temporarily raise ratios. The
most recent ratings and outlook on Bond Insurers by the Ratings Agencies are as
follows:
Yields on high-grade, short-term, tax-exempt continue to drop as cash flows
into money funds. The variable rate market appears to be consolidating as
issuers continue to address solutions to their auction rate debt.
10-Day
Yield History of U.S. Treasuries and
Bond Buyer 40 Municipal bond Index |
| |
30yr |
10yr |
5yr |
2yr |
B.B. Index |
| June 6 |
4.625 |
3.911 |
3.177 |
2.376 |
5.07 |
| June 5 |
4.737 |
4.040 |
3.323 |
2.499 |
5.11 |
| June 4 |
4.699 |
3.978 |
3.259 |
2.451 |
5.05 |
| June 3 |
4.622 |
3.896 |
3.188 |
2.402 |
5.02 |
|
June 2 |
4.671 |
3.959 |
3.273 |
2.508 |
5.08 |
|
May 30 |
4.716 |
4.061 |
3.423 |
2.645 |
5.06 |
| May 29 |
4.749 |
4.077 |
3.426 |
2.686 |
5.14 |
| May 28 |
4.689 |
4.005 |
3.338 |
2.607 |
5.05 |
| May 27 |
4.642 |
3.921 |
3.220 |
2.505 |
5.01 |
| May 26 |
4.574 |
3.844 |
3.133 |
2.438 |
4.97 |
California Bonds currently trade at the following yields:
| |
30yr |
10yr |
5yr |
1yr |
| Cal Insured High
Grade (par coupon) |
4.58 |
3.74 |
3.01 |
1.75 |
| Cal Non-Rated |
6.25 |
5.25 |
4.50 |
3.50 |
Short Term Rates:
CA Exempt Weekly Variable Rates: 1.25%
Taxable Weekly Variable Rates: 2.40%
The information contained herein is based on sources that E. J. De
La Rosa & Co., Inc. (DLR) believes to be reliable, but it is neither
all-inclusive nor guaranteed by DLR, and it may be incomplete or condensed. The
information and opinions herein, if any, are subject to change without notice,
and DLR does not undertake to advise the reader of changes in opinion or
information. Some of the securities DLR follows may be unrated or below
investment-grade municipal bonds, or are high-yield corporate bonds, that
typically involve a higher degree of risk and more volatility than rated or
investment-grade municipal bonds, or investment grade corporate bonds.
Therefore, certain debt securities discussed in this update may be unsuitable
for some investors, depending on their specific investment objectives,
financial condition, and needs. This update is for informational purposes, and
under no circumstances is it to be construed as a recommendation, an offer, or
the solicitation of an offer to buy or sell any particular debt security. DLR
may make a market in or trade for its proprietary account the securities
discussed in this update. Also, DLR may have been a manager or co-manager of a
public offering of municipal bonds or other debt securities within the last
three years for issuers named herein. DLR or its managing partners, directors,
and employees individually, or their family members, may have either long or
short positions in the securities mentioned, and may purchase or sell these
securities from time to time in the open market or otherwise for their own
accounts or the accounts of others.
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