MMD Forward Rates Show Neutral Tone

The general tone of the municipal market continues to be neutral, but optimism is building overall, at least for the short term. When looking at the long term, even with higher interest rates seemingly assured

• Twelve percent of the more constructive traders see a move lower in yield for both the 10-year and 30-year MMD AAA spot rates of 4 to 6 basis points. PMs predicted even more significant moves, with 40% seeing drop in yield of 7 bps for the 10yr MMD spot rate and 20% expect a possible move that large for the 30yr range.
• Bearish respondents are disappearing from the survey as supply volume declines, while at the same time bullish respondents overall are ticking higher.
• Dealer inventories have increased going into next week, in line with the neutral to constructive tone of the survey.

The general tone of the survey continues to be neutral, but optimism is building overall, at least for the short term. When looking at the long term, even with higher interest rates seemingly assured, PMs are much more bullish than the sell side.

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“I’m neutral. We’re expecting higher rates, but not much movement for the coming week. We seemed to have settled in here,” said a respondent.

“We’ve got less supply coming, things are slow, so I think we’ll hang around these levels for now,” said a neutral respondent

“I hear some guys saying that theres no supply, July 4th is coming up, so the market should outperform, but I have to be neutral. Weve got all these headlines, and who knows what the next one will be. What’s next? But with all that it’s been a really boring market lately. Deals are getting, but the secondary is lacking liquidity it’s just a boring market.”

“We’ve got manageable supply, headlines that are generally in the bond markets favor, and the week after next is holiday week, so no supply then I’m slightly bullish,” said a respondent.

“The end of month, quarter, and pending holiday will keep activity and volatility low,” said a bearish respondent.

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