07/12/2024 Market Commentary
Municipal bond yields rallied Thursday after June’s Consumer Price Index was released, which showed inflation cooled more than expected. Consumer prices declined 0.1% in June, marking the first month of deflation since July 2022. On an annual basis, inflation is now at 3.0%, a drop from 3.3% in May. The CPI report beat market expectations, which had anticipated a 3.1% annual inflation rate.
Municipal bond yields dropped after the CPI Report was released, falling by two to eight basis points along the curve. The 10-Year and 30-Year MMD each dropped by five basis points.
Municipal bond mutual funds saw another week of fund inflows, with investors adding $774.7 million into municipal funds. This follows last weeks inflows of $334.8 million.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| July 5, 2024 | 2.85% | 3.73% |
| July 11, 2024 | 2.80% | 3.68% |
| Change (bps) | -5 | -5 |
Treasury yields performed even better than municipals after the CPI Report was released, dropping by as many as 12 basis points on the short-end of the curve. With inflation cooling more than expected, market participants have increased the odds that the Federal Reserve enacts its first rate cut at the September Federal Open Markets Committee meeting. The market is now expecting an 86% chance that the Fed will cut rates in September. Furthermore, some investors are now expecting a second rate cute to occur later in 2024.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| July 5, 2024 | 4.28% | 4.47% |
| July 11, 2024 | 4.20% | 4.41% |
| Change (bps) | -8 | -6 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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