9/3/2020 Market Commentary
Despite the ongoing stock market rally, municipal bond yields held constant for the most part over the past week.
Municipal Bond Yields This Past Week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| August 28, 2020 | 0.81% | 1.56% |
| September 2, 2020 | 0.83% | 1.57% |
| Change (bps) | +2 | +1 |
Treasury yields on the other hand, pushed lower throughout the week. The Fed’s announcement last week of its easy-money policy moving forward strengthened treasuries, especially on the long end.
The stock market continued to rally, led by tech stocks.
- The low rates expected over the next several years from the Fed’s recently announced policy caused bank stocks to dip. However, the strong performance of tech stocks pushed the S&P 500 to record highs.
- Investors are anticipating the flood of cash unleashed by central banks will make its way to equities.
- US Jobs report on Friday is forecasted to show payrolls continue to rebound in August from virus lows.
August supply came in at $41 billion, marking the third straight month above $40 billion.
- August 2020 volume was strong. It is the second strongest August over the last ten years (beat by August 2016).
- 30% of the August primary market supply was taxable. The investor audience for taxable municipals has grown, as institutional buyers have shown more interest.
- Despite the strong month, it is still a drop in volume compared to the two most recent months. The enormous volume in June and July reflected backlogs from the spring when there was more market uncertainty. That backlog has now been accounted for. Additionally, the second half of August saw increases in yields, which gave some issuers pause.
- $8.5 billion is expected to come to market this week.
- September may see another above-average month of supply, as some issuers will rush to market ahead of the election.
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