Municipal Market Review
The Municipal market is showing its seasonal burden. Historically, March through April is a tough time-period for municipal bonds and they are set-up to underperform (detailed in February’s Monthly Report). This year is no different. Over the last 30 days, we have seen the following:
- Long-term yields have increased 18 to 21 bps (25 to 15 year bonds), while short-term yields have increased 7 bps (5 year bonds).
- This could have been worse, but credit spreads have actually tightened, as measured by credit default spreads. On average, the cost to insure against a state defaulting on its debt has gone down 6 bps since the end of February.
- Municipal bonds, on some parts of the curve, are starting to represent good value when comparing muni yields with Libor swap rates:
- 10 year yield ratio is at 96% vs. 82% same day in 2012.
- 15 year yield ratio is at 97% vs. 93% same day in 2012.