Yields in the $3.7 trillion municipal bond market rose for the first time in six weeks as U.S. state and local governments prepared to sell the most debt this year.
The yield on top-rated tax-exempt bonds due in 10 years increased 0.07 percentage point this week to 1.84 percent at noon in New York, according to a Bloomberg Valuation Index. The move follows five straight weekly declines that pushed the rate to lowest in three months.
State and local issuance totaled $8.1 billion this week, the biggest amount since the period ended April 20, data compiled by Bloomberg show. It may rise to about $10.5 billion next week, which would be the most this year, the data show.
“In addition to just hitting that wall of lack of seen value, there’s pretty hefty supply,” said David Frank, a managing director in public finance at CastleOak Securities LP in New York.
Even with yields near the lows set earlier this year, investors added about $805 million to muni mutual funds in the week through May 16, Lipper US Fund Flows data show. It was the fifth-straight week of inflows and the 23rd of the past 24, the data show.
The muni market has returned 4.1 percent this year through yesterday, beating a 1.4 percent increase for Treasuries, according to Bank of America Merrill Lynch index data.
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