Municipal Bonds Show Improvement
Munis firmer out long, with monthly and yearly gains expected as the technical picture turns more favorable in November and December, according to Birch Creek strategists.
The municipal market saw gains on Tuesday, with USTs richening 10 years and in, and equities ending mixed. The muni-UST ratios were:
- two-year at 67%
- five-year at 65%
- 10-year at 70%
- 30-year at 90%
The wider new issue concessions brought about via the heavy new issue calendar will likely be rewarded.
Despite this, munis continued their underperformance last week, led by front-end weakness. The front end saw 2026-2029 maturities experience a two to five basis point cut, while the rest of the curve saw yields bumped one to five basis points, said Jason Wong, vice president of municipals at AmeriVet Securities.
Author's summary: Munis expected to gain in November and December.