04/19/2024 Market Commentary
- April 19, 2024
Municipal bond yields rose this week, but continued to outperform Treasuries. This has led to a decline in Muni-to-UST ratios where levels are already considered to be quite rich. Muni-to-UST ratios as of Thursday were at 63% in Year 3, 59% in Year 10, and 82% in year 30. The 10- and 30-Year MMD ended the week up by 2 and 4 basis points respectively.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| April 11, 2024 | 2.72% | 3.86% |
| April 18, 2024 | 2.74% | 3.90% |
| Change (bps) | +2 | +4 |
Fed Chairman Powell delivered public remarks on Tuesday, where he acknowledged that progress on inflation has stalled so far in 2024, and that it’s likely that interest rates will need to remain higher for longer than expected. The March CPI report released last week marked three consecutive months of hotter than expected inflation reports and the Fed Chairman stated that this has validated the Fed’s “wait and see” approach to rate cuts.
Treasuries continued their rise this week, and have now risen by 25-35 basis points across the curve since April 1. This week also saw investors continue to pare back their rate cut expectations for the year with three rate cuts now appearing very unlikely. Investors are increasing their bets that the first rate cut will not occur until September at the earliest.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| April 11, 2024 | 4.56% | 4.65% |
| April 18, 2024 | 4.64% | 4.74% |
| Change (bps) | +8 | +9 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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