Weekly Commentary
Capital Markets Review — February 3, 2012
KANSAS CITY (800) 548-2663 | ST. LOUIS (800) 392-2252 | WICHITA (800) 365-0349
Muni vs. Treasuries
Market Comment
U.S. stocks advanced and bond yields jumped on Friday after the U.S. jobless rate fell unexpectedly. The unemployment rate dropped to 8.3%, the lowest since February of 2009, while the 243,000 increase was the biggest in nine months and surpassed most forecasts. Primary market activity in the municipal market was a perfect illustration of what happens during periods of light new issuance and heavy reinvestment demand. Meanwhile, secondary market action saw some steep pricing on both the offer and bid side. The result was a significant spread tightening throughout the curve until Thursday, after which trading activity became more reluctant in anticipation of Friday’s employment data. The tightening in mortgage space paused for a bit on Wednesday with President Obama’s refinancing proposal but not even that could keep mortgages from running. Lower dollar prices after the Friday payroll number brought in buyers and mortgages were again tighter on the week.
With the Fed pledging to keep rates low for quite some time and more chatter of potential streamlined refinancing we would expect some volatility in the mortgage sector. However, it seems that mortgages will continue to perform well with very little yield available elsewhere.
Thomas Verstappen - VP, CMG Municipal Trading
Calendar
| Monday | Tuesday | Wednesday | Thursday | Friday |
|---|---|---|---|---|
| 6-Feb | 7-Feb | 8-Feb | 9-Feb | 10-Feb |
| IBD/TIPP Economic Optimism | MBA Mortgage Applications
|
Initial Jobless Claims | Trade Balance | |
| JOLTs Job Openings | Continuing Claims | U. of Michigan Confidence | ||
| Consumer Credit | Wholesale Inventories | Monthly Budget Statement |
Market Information
| Key Indices | |||
| Current | Last Month | 1 Yr Ago | |
| Prime Rate | 3.25 | 3.25 | 3.25 |
| Discount Rate | 0.75 | 0.75 | 0.75 |
| Fed Funds | 0.11 | 0.04 | 0.18 |
| 1-Mth Libor | 0.26 | 0.29 | 0.27 |
| 11th Dist Cofi | 1.22 | 1.20 | 1.47 |
| 1-Yr CMT | 0.14 | 0.12 | 0.28 |
| Dow | 12,862.20 | 12,397.38 | 12,062.26 |
| Nasdaq | 2,905.66 | 2,648.72 | 2,753.88 |
| S&P 500 | 1,344.90 | 1,277.06 | 1,307.10 |
| Bond Buyer | 3.60 | 3.83 | 5.25 |
| Municipal New Issue Calendar | |||
| Date | Amount | Description | Maturity |
| 2/6/2012 | $460m | City of Rose Hill, KS GO Ser 2012 UT GO BQ NR | 2013-2032 |
| 2/6/2012 | $23,380m | Oklahoma Cnty ISD #12 Edmond Schools UT GO NOT BQ AA rated | 2014-2017 |
| 2/7/2012 | $5,840mm | City of Manhattan KS GO Temp Notes Ser 2012-01 NBQ Moody's rating applied for | 2013-2014 |
Comparative Spreads
| New Issue Agencies | Muni | |||||
| Treasuries | Bullets | NC 6 Mon | NC 1 Yr | NC 2 Yr | AA - BQ | |
| 3 Mon Bill | 0.07 | 0.21 | ||||
| 6 Mon Bill | 0.09 | 0.23 | ||||
| 1-Yr Treas | 0.12 | 0.25 | ||||
| 2-Yr Note | 0.23 | 8 | 0 | 0.37 | ||
| 3-Yr Note | 0.31 | 13 | 12 | 13 | 0.54 | |
| 5-Yr Note | 0.76 | 23 | 21 | 32 | 33 | 0.81 |
| 7-Yr Note | 1.32 | 24 | 40 | 48 | 41 | 1.34 |
| 10 Yr Bond | 1.92 | 44 | 51 | 60 | 51 | 1.89 |
| 30 Yr Bond | 3.13 | 3.36 | ||||
$410,000 Sherman KS Sales Tax G.O. 2% 07/01/18 @ 1.30% BQ /A
If you no longer wish to receive this weekly newsletter please send an email to janine.ross@commercebank.com
Capital Markets Review is a publication of the Capital Markets Group of Commerce Bank. This material is for your private information and we are not soliciting any action based upon it. This is not an offer to buy or sell securities, and no responsibility is taken for any possible loss incurred by clients. The material is based upon information that we consider reliable, but Commerce Bank does not represent that it is accurate or complete, and it should not be relied upon as such. Commerce Bank does not assume any liability for your use of the information contained herein. Opinions expressed are statements of judgement on this data and are subject to change without notice. No part of this material may be copied, photocopied, or duplicated in any form by any means or redistributed without Commerce Bank's prior written consent. For more information, please contact your account representative.
Investments: NOT FDIC-INSURED May Lose Value No Bank Guarantee
Important Disclaimers:
- To send an email that contains confidential information, please visit the Secure Message Center where there are additional instructions about whether to use Secure Email or Online Banking messaging.
