Bloomberg News

Muni Yields at Two-Month High on Biggest Run in Two Years

October 06, 2011

(Updates move in yields starting in first paragraph.)

Oct. 6 (Bloomberg) -- Yields on top-rated municipal debt have recorded the biggest four-day increase in at least two years as municipalities brought $8.8 billion of debt to market.

Interest rates for 10-year tax-exempt bonds climbed 16 basis points to about 2.45 percent today, the highest since Aug. 4, according to Bloomberg Valuation index data. Yields, which move inversely to prices, surged about 10 basis points yesterday, the most since Jan. 13. A basis point is 0.01 percentage point.

“The market collapsed based on the weight of supply,” said Michael Pietronico, who manages $590 million as chief executive officer at Miller Tabak Asset Management in New York.

Yields will “probably inch up more over the next few days and we would suggest investors take advantage of that,” he said in a telephone interview.

Ten-year yields have rebounded since falling to about 2 percent last month, according to Bloomberg index, which begins in January 2009.

States and municipalities as of today are set to sell $10.58 billion of debt during the next 30 days, down $2.3 billion from yesterday, according to data compiled by Bloomberg. That’s the biggest one-day drop in two weeks. Still, borrowers including the Triborough Bridge & Tunnel Authority and the Oklahoma Turnpike Authority sold debt this week, which is set to be the year’s busiest, according to Bloomberg data.

Refunding Drive

Municipalities refinancing debt will help drive tax-exempt sales to about $75 billion this quarter, up from a projection of $60 billion, Chris Mauro, a municipal-debt strategist at RBC Capital Markets in New York, wrote in a report.

The price of U.S. Treasuries fell for a third day after news that European leaders increased their efforts to resolve their debt crisis. Yields on the benchmark 30-year bond increased seven basis points to 2.93 percent at 2:01 p.m., after falling to a two-year low.

--With assistance from Andrea Riquier in New York. Editors: Walid El-Gabry, Ted Bunker

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.


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