Municipal Bond Market: March, 2020
- Coronavirus driven market continue to skew risk-off/risk-on asset class results.
- Yields on investment grade munis softened (rose) as concerns about the impact of COVID-19 on municipal issuers has risen.
- The 10-year IHS Markit AAA Muni Yield at month-end was 1.38% a marked shift cheaper than month-end February.
- Compared to the 2.21% dividend yield of the SPDR S&P 500 ETF, the IHS Markit Municipal Bond 10 Year AAA yield of 1.38% continues to be very rich from an income generation perspective relative to the equity market dividend yield. However, this assumes dividends will flow in the same amount as pre-Covid-19 markets.
Source: IHS Markit. Data as 3/31/2020.
Select Asset Class Total Returns & Yields Year-to-Date
Sources: iShares by BlackRock, SPDRs and Yahoo.com. 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 3/31/2020. (1) SPDR S&P 500 ETF Yield is Dividend Yield as of 3/30/2020.
Sources: IHS Markit (Municipal bond yields), SPDR and the U.S. Department of Treasury. Chart is provided for illustrative purposes only. Past performance is not a guarantee of future results. Data as 3/31/2020 with exception of SPY Dividend yield which is as of 3/30/2020.
Data Resources Used in this Report:
Notes:
- 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
Analyst Disclosure:
- At the time of this writing, JR Rieger’s fixed income related holdings include investment grade individual municipal bonds, insured municipal bonds, a municipal bond money market fund and a position in the VanEck Vectors High-Yield Municipal Index ETF (HYD)
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