Municipal Bonds v. U.S. Treasury & Corporate Bonds

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November 2018: Municipal Bonds Show Their Strength

November results:

  • Investment grade municipal bonds showed less volatility and better performance than corporate bonds. Ten year municipal bonds tracked the U.S. 10 year yield and moved down 14bps on the month easily absorbing new muni supply.
  • Taxable municipal bonds tracked in the S&P Taxable Municipal Bond Index fell 0.77% in October and is down 1.88% year-to-date
  • Municipal bond sectors with notable change:
    • S&P Municipal Bond Tobacco Index (Tobacco Settlement bonds) was down 1.44% in November, down over 4.9% in the last three months (the index is up over 2.3% year-to-date).
    • Impacted by Tobacco bonds, the S&P Municipal Bond High Yield Index was barely up for the month (the index is up 4.3% year-to-date)
    • The ten year range tracked in the S&P Municipal Series 2028 was up 1.98% in November and remains in negative territory with a 1.25% year-to-date return. Illustrating the quality of bonds tracked in the index, the index is yielding 2.88% the tracking the ten year MBIS AA Municipal Curve extremely closely (better by 3bps.)

Data as of 11/30/2018

Sources: Municipal bond yields & performance data sourced from The Bond Buyer Data Workstation, MBIS and S&P Dow Jones Indices

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Data as of 11/30/2018

Sources: S&P Dow Jones Indices.

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Data as of 11/30/2018

Sources: Municipal bond yields sourced from The Bond Buyer Data Workstation, MBIS, U.S. Treasury bond yields sourced from the U.S. Department of the Treasury, the S&P 500 Dividend Yield data as of 10/26/2018 and was sourced from the S&P Dow Jones Indices. Current indicated dividend yield is used. Chart is provided for illustrative purposes only.

RR120318_Chart3

Data as of 11/30/2018

Sources: Municipal bond yields sourced from The Bond Buyer Data Workstation, MBIS Municipal Yield Curves and U.S. Treasury bond yields sourced from the U.S. Department of the Treasury. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield at tax rate assumption stated.

RR120318_Chart4

Data as of 11/30/2018.

Sources: Apple Inc. bond yields provided by SQX. Municipal bond yields sourced from The Bond Buyer Data Workstation and MBIS. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield at tax rate assumption stated.

RR120318_Chart5.jpg

Data as of 11/30/2018.

Sources: Apple Inc. bond yields provided by SQX. Municipal bond yields sourced from The Bond Buyer Data Workstation and MBIS.  U.S. Treasury bond yields sourced from  the U.S. Department of the Treasury. Chart is provided for illustrative purposes only. TEY = Taxable Equivalent Yield at tax rate assumption stated.

Data Resources Used in this Report:

Notes:

  • Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
  • 2018 tax brackets, however not all tax brackets are represented herein
  • End of day yields are used

Analyst Disclosure:

  • JR Rieger and or the Rieger Report LLC has not received compensation either directly or indirectly from the sponsor(s) of the ETF(s) included in this report.
  • At the time of this writing, JR Rieger does not own the ETF(s) cited in this report, nor bonds issued by Apple Inc.
  • Between July 1st and July 13th 2018, JR Rieger purchased insured municipal bonds and AA and higher rated municipal bonds in the 8 – 14 year maturity range. In September 2018 JR Rieger purchased insured municipal bonds in the 10 year range.
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