08/16/2024 Market Commentary
- August 16, 2024
Municipal bond yields trickled lower on Wednesday after the release of the July Consumer Price Index Report. The CPI report was in line with market expectations, and showed that inflation continues to trend downward. MMD yields dropped by 2 basis points that day along the curve as a result. However, the gains were erased on Thursday, after a report showed jobless claims fell more than expected, reducing the chances of a 50 basis point rate cut at the next Federal Open Markets Committee. Treasury yields rose Thursday and MMD yields followed suit, with MMD yields ending a tick higher than where they started the week.
Municipal bond mutual funds saw another week of inflows, with investors adding another $528.7 million to municipal funds, marking the seventh consecutive week of fund inflows. New bonds coming to the market this week totaled an estimated $7.4 billion, a big drop off from last week’s whopping $15 billion new-issue calendar.
Tax-exempt yields over the past week
| 10-Year MMD | 30-Year MMD | |
|---|---|---|
| August 8, 2024 | 2.70% | 3.58% |
| August 15, 2024 | 2.71% | 3.59% |
| Change (bps) | +1 | +1 |
Treasury yields saw more volatility this week, being largely driven by the release of July’s CPI Report. The report showed that prices increased 0.2% in July, matching economist’s forecasts. On an annual basis, CPI came in at 2.9%, besting the expected 3.0%. This marks the first month in which year-over-year inflation has come in below 3.0% since 2021.
On Thursday, a report showed that US Jobless claims decreased by 7,000 last week, a number that is better than the market had expected. This report shows that the labor market is not weakening at the pace that was assumed a few weeks back, and gives the Fed less incentive to enact a 50 basis point rate cut at the September FOMC meeting. Economists are now forecasting a 75% chance of a 25 basis point rate cut at the September FOMC meeting, and a 25% chance of a 50 basis point cut.
Treasury yields over the past week:
| 10-Year Treasury | 30-Year Treasury | |
|---|---|---|
| August 8, 2024 | 4.00% | 4.29% |
| August 16, 2024 | 3.93% | 4.19% |
| Change (bps) | -7 | -10 |
Written by Dan Shaw, Director, Oppenheimer & Co. Inc., Public Finance.
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