Weekly Commentary

Capital Markets Review
February 5, 2010

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Muni vs. Treasury Spreads


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Market Comment

The unemployment rate in the US unexpectedly dropped to 9.7% in January (forecast to be unchanged at 10%), indicating the labor market may be poised to climb out of its deepest slump since World War II. Treasuries rose for a second day after the government report indicated the unemployment rate declined while the economy lost jobs. Yields on notes were near six-week lows after a Labor Department showed nonfarm payrolls declined by 20,000 even though the forecast called for an increase by 15,000.
In addition, Treasuries climbed the latter part of the week, pushing 30-year bond yields down the most in four months, as concern mounted that some European countries face difficulty narrowing their budget deficits.
Manageable primary calendars in the tax-exempt municipal sector and scarcity of secondary blocks caused bidders reaching big for offerings. One sector of the market that would underscore this best was in the 2018-2022 range where yields dropped by over 10 basis points this past week.
The least movement was shown in the 20yr range (3bps) as this sector seems the last range to get focus from buyers and the street. But, as primary supply comes to market, it is expected the steepening curve will push buyers into this range as well.

Thomas Verstappen, CMG Municipal Trader

 

Calendar

Monday Tuesday Wednesday Thursday Friday
8-Feb 9-Feb 10-Feb 11-Feb 12-Feb
         
  ABC Consumer Confidence MBA Mortgage Applications Initial Jobless Claims  
3 & 6 Mth Auc Settle 02/11 Wholesale Inventories Monthly Budget Stmnt Retail Sales Ex Auto & Gas U. Of Michigan Confidence

Market Information

Key Indices
  Current Last Month 1 Yr Ago
Prime Rate

                       3.25
3.25
3.25
Discount Rate
0.50
0.50
0.50
Fed Funds
0.14
0.12
0.19
1-Mth Libor
0.23
0.24
0.45
11th Dist Cofi
1.83
2.09
2.00
1-Yr Cmt
0.31
0.41
0.54
Dow
10,012.20
10,572.00
8,063.07
Nasdaq
2,141.12
2,308.71
1,546.24
S&P 500
1,066.19
1,136.52
845.24
Bond Buyer
4.36
4.31
4.96
Municipal New Issue Calendar
Date Amount Description Maturity
02/08/10
 $8,500,000 Columbia SD MO BQ
2011-2017
02/08/10
 $1,270,000 Hugoton KS T/N BQ
2011
2/9/10
 $36,000,000 Metro Council MN BAB
2011-2030
2/10/10
 $170,000 Seminole Cnty OK ISD 2 BQ
2012-2015
2/16/10
 $7,335,000 Manhattan KS
2011,2013
2/16/10
 $19,000,000 Tulsa Cnty OK ISD 2 BQ
2012-2015
2/16/10
 $2,720,000 Colby KS BQ
2010-2019
2/16/10 $185,000,000 MO Dept of Trans  

Comparative Spreads

  New Issue Agencies Muni
 
Treasuries
Bullets
NC 6 Mon
NC 1 Yr
NC 2 Yr
AA - BQ
3 Mon Bill
0.08
        
              0.35
6 Mon Bill
0.14
        
0.40
1-Yr Treas
0.26
        
0.50
2-Yr Note
0.75
20
28
25
  
0.80
3-Yr Note
1.25
32
49
45
34
1.10
5-Yr Note
2.23
34
63
60
46
1.90
7-Yr Note
3.00
34
65
57
45
2.65
10 Yr Bond
3.57
43
73
71
57
3.25
30 Yr Bond
4.52
        
4.35

                                                                  

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