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Stronger Market Adapts to BABs, State Budget Vote
Tax-exempt trading slowed going into the long Memorial Day weekend. Market
strength continued as the threat of unmanageable supply from taxable Build
America Bonds (BABs) diminished, and light secondary trading continued at
higher levels (with lower yields).
Many market participants waiting for results from California’s special election
were surprised when the market rallied after voters rejected five
budget-related propositions. New investor sentiment suggests the federal
government may, if necessary, bail out municipalities during this crisis.
Lower tiered credit spreads have tightened drastically as investors recently
showed more comfort in taking market risk. The bearish feeling is still out
there; both relative and absolute yields have been pushed far since BABs were
first issued, yet overall market sentiment is balanced to neutral from a lack
of primary supply.
10-Day
Yield History of U.S. Treasuries and
Bond Buyer 40 Municipal bond Index |
| |
30yr |
10yr |
5yr |
2yr |
B.B. Index |
|
May 22 |
4.385 |
3.451 |
2.203 |
0.887 |
5.08 |
|
May 21 |
4.313 |
3.366 |
2.141 |
0.863 |
5.07 |
| May
20 |
4.145 |
3.193 |
2.027 |
0.838 |
5.07 |
| May
19 |
4.209 |
3.245 |
2.101 |
0.887 |
5.11 |
| May
18 |
4.199 |
3.232 |
2.100 |
0.911 |
5.13 |
| May
15 |
4.085 |
3.136 |
2.000 |
0.855 |
5.14 |
|
May 14 |
4.049 |
3.090 |
1.960 |
0.847 |
5.15 |
|
May 13 |
4.100 |
3.121 |
1.980 |
0.871 |
5.15 |
| May
12 |
4.160 |
3.175 |
2.013 |
0.887 |
5.17 |
|
May 11 |
4.186 |
3.167 |
2.023 |
0.895 |
5.18 |
California Bonds currently trade at the following yields:
| |
30yr |
10yr |
5yr |
1yr |
| Cal Insured High
Grade (par coupon) |
4.83 |
3.55 |
2.33 |
0.50 |
| Cal Non-Rated |
8.00 |
6.75 |
5.75 |
4.00 |
Short Term Rates:
CA Exempt Weekly Variable Rates: 0.10%
Taxable Weekly Variable Rates: 1.25%
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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