Worst Muni Rout Since 1984 Deepens Even With Treasury Gain
Worst Muni-Bond Rout Since 1984 Deepens Even as Treasuries Gain
(Bloomberg) -- Municipal-bond prices tumbled as investors pull funds out the $3.9 trillion market, extending a nearly two-week slide that’s put the market on pace for its steepest losses since 1984.
Benchmark 10-year yields rose 13 basis points to 2.06%. Those on the shortest-dated securities -- which are the easiest to unload for fund managers who have been raising cash to meet withdrawals -- surged 16 basis points to 1.83%, nearly four times what it was last week. Yields on the longest-dated securities jumped 14 basis points to 2.63%, according to Bloomberg BVAL indexes.
The continuing sell-off in state and local government debt came despite a climb in global bond prices after policy makers instituted plans aimed at easing the market turmoil. Sovereign bonds soared from France, Italy and Greece after the region’s central bank boosted efforts to stabilize the economy and capital markets. Yields on U.S. Treasuries fell about 10 basis points to 1.09%.
The municipal-debt market has been battered by a liquidity crunch as fearful investors pull out their cash. Investors continued to pull back from municipal-bond exchange-traded funds, with BlackRock Inc.’s iShares National Muni Bond ETF seeing a $132 million outflow on Wednesday. The fund, which is the largest muni ETF, has recorded $602 million in outflows in the last week.
The pace of the sell-off shows how sharply some investors have retreated as losses pile up amid broad uncertainty about how the coronavirus shutdown will cascade through the finances of local governments, hospitals and transit systems that have floated debt.
“Municipal bonds are supposed to be the safe asset,” said Patrick Luby, who tracks the market for CreditSights Inc. “You see this volatility, you see these losses, it can be very upsetting for someone looking at their nest egg.”
©2020 Bloomberg L.P.