Bond Market Commentary

Updates on bond market data, news, and activity each day.

June 18, 2018


Friday's Action

Treasuries advanced on Friday, pressing yields lower along the curve amid heightened trade tensions. Yields fell following an announcement from President Trump’s administration that $50 billion in tariffs will be imposed on imports from China. Treasury prices pared their early advance following a preliminary economic release from the University of Michigan, which showed its consumer sentiment index increased to 99.3 in June, above consensus expectations and May’s 98.0 final reading. The yield on the benchmark 10-year note slipped two basis points to 2.92%, ending the week essentially unchanged. Meanwhile, the yield on the 30-year bond finished flat at 3.05%. On the short end of the curve, the yield on the two-year note declined two basis points to 2.55%.

Mortgages

Mortgage rates advanced this week, ending the downward trend of the two prior weeks, according to Freddie Mac Primary Market Mortgage Survey® (PMMS®). For the period ending June 14, the 30-year fixed rate mortgage climbed eight basis points from the prior week to 4.62% .This compares to 3.91% a year ago. The 15-year fixed rate mortgage advanced six basis points to 4.07%, and compares to 3.18% this time last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.83%, up nine basis points from a week ago and compares to 3.15% last year.

Municipal Market Commentary

Friday, the Municipal Market Data (MMD) 10-year triple-A benchmark yield fell 1 bp to 2.48%, still up 50 bps year-to-date (1.98%). The Bloomberg Barclays Municipal Bond Index rose 0.02%, compared to the Bloomberg Barclays US Treasury Index and the Bloomberg Barclays Corporate Bond Index, which rose 0.19% and 0.24%, respectively. Year-to-date the Municipal Bond Index is down 0.54% outperforming the Treasury and Corporate Bond Indices, which are down 1.69% and 3.28%, respectively. The 10-year triple-A muni-to-Treasury ratio rose 0.9 percentage points, for the week, to 84.8% indicating that 10-year munis are relatively cheap compared to the ratio’s 90-day average (84.5%) but relatively rich compared to its 12-month average (85.1%). For the week, the 30-year triple-A muni-to-Treasury ratio rose 1.2 percentage point to 98.1%, indicating that 30-year munis are relatively cheap compared to the ratio’s 90-day (96.8%) and its 12-month averages (96.7%). Tax-exempt new issue supply is expected to total approximately $6.5 billion the week of June 18, up from $5.2 billion the prior week and above the 2018 weekly average of $5.2 billion. The Bloomberg 30-day visible supply fell $2.791 billion to $8.191 billion on Friday, below the 12-month average of $10.885 billion.