(Nov. 28) -- Investors who have fled to U.S. Treasuries are missing out on bargains in the municipal bond market. Smaller investors are still buying, but a dearth of big institutional investor participation has left muni bonds in the dust vis-a-vis Treasuries.
Activity was relatively slow this week because of the Thanksgiving Day holiday.
One ratio of municipal bond yields to Treasuries jumped to about 149%, mainly because the 30-year Treasury bond is hovering near historic lows. A couple weeks ago this ratio had declined to 118% after hitting a peak above 140% in mid-October. Remember, historically this ratio has been at 90% or lower.
The latest new sale we want to mention to provide some sort of yield benchmark occurred a full week ago. The Tracy Operating Partnership Joint Powers Authority sold $19.7 million of lease revenue bonds. S&P rates the debt A-plus but the deal included Assured Guaranty bond insurance as well.
A five-year bond with a 4.00% coupon was priced to yield 4.05%. A 10-year bond with a 5% coupon was priced to yield 5.10%. A 15-year bond yielded 5.90% and a 30-year bond, 6.60%. (Issuers selling general obligation bonds in the current market won't pay that much. These are astounding yields if you assume Assured Guaranty's bond insurance is still worth something.)
In the biggest deal looming next week, the Transmission Agency of Northern California has lined up about $425 million of revenue bonds.
(The Bond Advisor is going to start providing, usually early on Friday morning each week, a quick summary of the California municipal bond market. Individual investors often ask us for a sense of what kind of yields were available recently. Just remember that each deal is different and various factors and structuring influence yields, even among bonds with similar credit characteristics. We depend on underwriters, brokers, and other market participants to provide accurate information about the coupons, yields, etc.
(The other thing individual investors have asked us to do is to provide a list of upcoming bond sales. While we plan to refine that page over time, a list of pending deals is available by going here. The list is by no means complete, but it should improve as underwriters and others provide more information.)
Last year the Bond Advisor warned investors they couldn't tarry when interest rates spiked higher. In the autumn of 2008 the story is completely different. Bargains abound and thanks to the current market mess they won't go away soon. Subscribers get regular discussions about trends, including updates on the shape of the yield curve that can influence buying decisions. The once-staid municipal bond market moves a lot faster today. We help you on stay on top of the latest trends.