Bloomberg News

Biggest Muni ETF Lowest Since 2011 After Bernanke Rattles Market

June 20, 2013

The largest exchange-traded fund tracking the U.S. municipal-bond market fell to the lowest price in almost two years and the week’s two biggest sales were delayed as the Federal Reserve said it may stop buying debt.

The $3.6 billion (MUB:US) iShares S&P National AMT-Free Municipal Bond Fund, known as MUB, fell to $104.10 (MUB:US) at 2:26 p.m. in New York today, the lowest since August 2011 and the biggest one-day price drop since February 2012, data compiled by Bloomberg show.

The price decline mirrored changes in the $3.7 trillion municipal market, where tax-exempt yields rose along with those on Treasuries, said David Manges, muni trading manager at BNY Mellon Capital Markets LLC in Pittsburgh. Yields move in the opposite direction of prices.

“The muni market is in a free-fall today,” Manges said. “It’s tough to get a sense of value or benchmark spreads because prices are so fluid.”

Fed Chairman Ben S. Bernanke yesterday said the central bank plans to slow its bond-buying program this year and end its monthly purchases of federal debt and mortgage securities in mid-2014, if the economy continues to improve. Yields on 10-year Treasuries climbed to 2.43 percent, the highest since August 2011, Bloomberg data show.

Mutual funds and other institutional buyers of munis put about $900 million of state and local debt up for sale yesterday, Bloomberg data show. That compares with a one-year daily average of $548 million.

Deals Delayed

Yields on benchmark 30-year municipals increased to about 3.68 percent at 2 p.m. in New York, the highest since Jan. 9, 2012.

The California Health Facilities Financing Authority postponed a $764 million sale for St. Joseph Health System, the biggest muni sale of the week, Bloomberg data show.

Brian Greene, a spokesman for St. Joseph Health System, said he wasn’t able to immediately comment on the sale. Bill Ainsworth, a spokesman for California Treasurer Bill Lockyer and the authority, didn’t immediately respond to a request for comment on the postponement.

New York’s Metropolitan Transportation Authority, which operates the biggest U.S. transit system, delayed a $350 million bond sale because of “market volatility,” Aaron Donovan, a spokesman, said in an e-mail. The transit authority plans to sell the bonds in the next two to three weeks, Donovan said.

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

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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Companies Mentioned

  • MUB
    (iShares National AMT-Free Muni Bond ETF)
    • $109.15 USD
    • 0.01
    • 0.01%
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