Municipal Bond Market Absorbs New Issue Supply
- Compared to U.S. corporate bonds, municipal bonds have underperformed so far in 2019. Yields of corporate bonds have moved lower in sync with U.S. Treasury yields while municipal bond yields have moved less.
- Robust new issue municipal supply, while readily absorbed by the muni market, may be a factor in holding municipal yields up during this period.
- In the short end of the curve and extending into the intermediate range of the curve investment grade municipal bonds remain rich relative to U.S. Treasury Bonds, S&P 500 Dividend Yield and corporate bond yields.
- AA rated municipal bond yields indicate relative value v. corporate bonds beginning in the 12- 15 year range and extending out longer on the curve.
- Pension obligation shortfalls: At this time, there does not seem to appear a significant market penalty for Illinois, Connecticut and New Jersey G.O.s due to their pension shortfalls.
Select Asset Class Total Returns & Yields
Source: S&P Dow Jones Indices. Table is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at assumed tax rate indicated. Data as 2/8/2019.
Sources: BondWave, Exchange Data International and U.S. Department of Treasury. Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. Data as 2/8/2019.
Sources: BondWave and Exchange Data International. Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at assumed tax rates indicated. Data as 2/8/2019.
Data Resources Used in this Report:
- Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
- 2019 tax brackets, however not all tax brackets are represented herein
- End of day yields are used
- At the time of this writing, JR Rieger owns individual municipal bonds and a municipal bond fund. JR does not own bonds issued by Apple Inc.
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