National Market Update Week of December 10, 2018 0
bps Market Update * Commentary for the week of December 10 th U.S. government bond prices rose Friday after data showing strong wage growth and low unemployment failed to assuage investor concerns about trade tensions and slowing growth. Yields, which fall when bond prices rise, slipped throughout Friday afternoon as stocks declined, pushing investors to seek safety in Treasury bonds. The recent jobs report showed nonfarm November payrolls increased 155,000 versus 237,000 in October. Average hourly earnings rose 0.2%, compared with forecasts for 0.3%. Signs which suggest economic growth is slowing down resulted in the fed funds futures late Friday at a 4% probability that the central bank will raise interest rates three or more times next year. On Friday the 10-year Treasury yield fell three basis points to 2.85%, while the 30-year Treasury yield remained unchanged at 3.14%, respectively, from Thursday s close. Furthermore, the 10-year and 30-year AAA rated muni yield rose one and two basis points to 2.38% and 3.10%, respectively, from Thursday s close. Municipal volume for this week is estimated to be $8.1 billion, higher than the revised total of $6.4 billion from the previous week. The primary municipal calendar is comprised of $6.9 billion of negotiated deals and $1.2 billion in competitive sales. MMD to Treasury Ratios 125% 10Y MMD/10Y Treasury Ratios 20Y MMD/20Y Treasury Ratios 30Y MMD/30Y Treasury Ratios MMD Rates AAA 10 Y AAA 20 Y AAA 30 Y 3.50 2.50 1.50 1.00 AAA MMD to BBB MMD Spreads 10Y AAA vs BBB MMD Spread 110 20Y AAA vs BBB MMD Spread 30Y AAA vs BBB MMD Spread 100% 85 75% 60 Source: * Bond Buyer Municipal Market Data Thomson Reuters TM3 1
($bn) Market Update Calendar Week of December 10 th Ratings* Bond Buyer 30-Day Visible Supply** Issue Description Sale (week of) Par Amount ($000) Moody's S&P Fitch Dorm Auth of the State of NY - State Personal Income Tax Rev Bds, Ser. 2018A and B 12/10 $ 1,714,285 Aa1 AA+ NR Northern CA Energy Auth - Commodity Supply Rev Bds, Ser. 2018 A, B, and C The IL State Toll Hwy Auth - Toll Hwy Sr Rev Bds, 2018 Ser. A (Ref) Co of Suffolk, NY - Tax Anticipation Nts for 2019 Taxes Dep of Wtr and Pwr of the City of L.A., CA - Pwr Sys Rev Bds, 2018 Ser. D Clifton Higher Edu Fin Corp, TX - Edu Rev Bds, Ser. 2018 D and E (Taxable) Jefferson Co Schl Dist No. R-1, CO - G.O. Bds, Ser. 2018 Muni Elect Auth of GA - Gen Pwr Rev Bds, Ser. 2018A and Pwr Rev Bds, Ser. HH State of AZ - State Lottery Rev Ref Bds, Ser. 2019 Public Fac Fin Auth of the City of San Diego, CA - Subordinated Wtr Rev Bds, Ser. 2018A National Top 10 Total Negotiated Supply $ 4,935,675 National Total Negotiated Weekly Supply $ 6,936,800 12/10 $ 525,035 A3 NR A 12/10 $ 430,000 Aa3 AA- AA- 12/10 $ 410,000 NR A- A- 12/10 $ 400,000 Aa2 AA AA 12/10 $ 345,935 NR NR NR 12/10 $ 341,420 Aa2 AA NR 12/10 $ 271,285 A1 NR A- 12/10 $ 251,000 Aa3 AA+ NR 12/10 $ 246,715 Aa3 NR AA- Bond Buyer 30 Day Visible Supply Bond Sales Volume 60 50 40 30 20 10 0 AAA MMD yield curve*** Dec-17 5.00 Nov-18 Dec-18 1.00 Thru 12/14/2018 Thru 12/15/2017 Thru 12/16/2016 Thru 12/18/2015 Total National Supply YTD $330,294,500 $406,761,100 $449,255,500 $371,213,524 0.00 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Year *Rating reflects underlying or insured rating, as appropriate **Source: Bond Buyer ***Source: Municipal Market Data 2
Bond Buyer Indices vs. 30 Year Treasury: 30 Year History 1 BB 11 GO Index BB Revenue Index 10.00 30 Year Treasury 8.00 6.00 BB 11 GO Index BB Revenue Index 30 Year Treasury High 9.05 9.59 10.20 Low 2.39 2.98 2.11 Average 4.65 5.27 4.91 Current 3.63 4.58 3.14 0.00 Dec-87 Dec-89 Dec-91 Dec-93 Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17 Source: Bond Buyer 3
bps Tax-Exempt and Treasury Spreads: 1 Year History Bond Buyer Indices vs. 30 Year Treasury MMD Rates 5.00 BB 11 GO Index BB Revenue Index 30 Year Treasury AAA 10 Y AAA 20 Y 4.50 3.50 AAA 30 Y 2.50 3.50 1.50 2.50 MMD to Treasury Ratios 1.00 AAA MMD to BBB MMD Spreads 115% 105% 10Y MMD/10Y Treasury Ratios 20Y MMD/20Y Treasury Ratios 30Y MMD/30Y Treasury Ratios 10Y AAA vs BBB MMD Spread 20Y AAA vs BBB MMD Spread 30Y AAA vs BBB MMD Spread 95% 90 85% 75% 75 Source: Municipal Market Data Thomson Reuters TM3 Bond Buyer 4
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