07/26/2024 Market Commentary
Municipal bond yields rose this week but outperformed treasuries as strong reinvestment demand helped to counter the effect of continued elevated supply. Total bond volume for the year is now at just over $266 billion. This is the fastest pace since 2013. However, most investors expect bond volume to taper off as we approach the November election.
In addition, municipal bond mutual funds continued to see fund inflows this week, with investors adding $865.7 million into municipal funds. This follows last week’s inflows of $906.1 million and net inflows now total over $5 billion for the year.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| July 18, 2024 | 2.78% | 3.66% |
| July 25, 2024 | 2.80% | 3.68% |
| Change (bps) | +2 | +2 |
Treasury yields ticked up this week as investors digested a slew of economic reports. On Thursday, U.S. economic growth for the 2nd quarter was released and showed that the economy grew at an annualized rate of 2.8%, much higher than originally expected. There was also some good news with regards to inflation as the PCE Price Index showed an increase of just 2.6% for the quarter, down from the 3.4% reported in the first quarter. Treasury Secretary Yellen stated that the reports continue to show that we are on a path towards “steady growth and declining inflation”.
The reports stabilized the view among investors that we are on a path to see our first rate cut in September. Looking forward to next week, all eyes will be on the Federal Reserve who meets on July 30/31 where they are widely expected to keep interest rates unchanged.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| July 18, 2024 | 4.20% | 4.41% |
| July 25, 2024 | 4.27% | 4.50% |
| Change (bps) | +7 | +9 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
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