Stepping Into 2Q'12
- Friday, 04/13/2012
An equity market rebound, such as we witnessed yesterday (+181 points as measured by the DJIA1), usually spells doom for the fixed-income markets. Additionally, the revelation that Bill Gross has reduced his holdings in U.S. Treasuries by 4-5% would further the notion that the day would go badly for bonds. And with the Treasury auction of $13 billion of 30 year-bonds (no longer the benchmark), the early byline would be expected to bemoan a market unable to get out from under...
But only a modest retreat in the municipal market was in order yesterday despite the above.
With significant new supply in the municipal market, certain price concessions allowed issues such as California General Obligations and Puerto Rico Electric to find plenty of demand. There was particular focus on high-grade secondary issues around the 10-year spot on the curve, helping to hold market interest away from the new issues. Like our Treasury counterpart, only modest losses are evident on the curve.
1The DJIA is a broad measure of the U.S. stock market and refers to the Dow Jones Industrial Average, a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.