Municipal bond update
Benchmark AAA muni yields rose sharply across the curve last week, led by the very front end. The two-year yield rose by a striking 24 basis points (bps), while the five-, 10-, and 30-year yields rose 19, 16, and 13 bps, respectively. Year-to-date (YTD) tax-exempt yields are now sharply higher, with five-, 10-, and 30-year AAA yields up by 60, 52, and 50 bps, respectively (Refinitiv MMD, 9/22/2023).
The Bloomberg Municipal Bond Index lost 1.08% on the week, bringing YTD performance to just 0.15%. The Bloomberg US Treasury Index declined by 0.50% to -0.89% YTD (Bloomberg, 9/22/2023).
Municipal mutual funds reported outflows of approximately $636 million for the period, taking the YTD outflow total higher to approximately $10.8 billion (Refinitiv Lipper, 9/21/2023).
Five-, 10-, and 15-year A-rated municipal yields were 3.32%, 3.50%, and 4.16%, respectively, as of close on September 22. Related taxable-equivalent yields were 5.61%, 5.91%, and 7.03%, respectively, assuming the highest level of federal tax at 40.8% (Refinitiv MMD and Parametric, 9/22/2023).