Municipal bond ETFs got crushed again yesterday. It could be due to the rise in municipal bond credit risk (Cali fiscal emergency?), re-pricing of bond yields, potential end to Build America Bonds or forced selling somewhere. If you've been reading this blog for a while this shouldn't come as a surprise (see index: municipal bonds, municipalities). $MUB (National Municipal Bond ETF) is down 8.2% since early October, which on the chart looks kind of bloody.
On October 3 I told you to watch the MMA (Municipal Market Advisors) AAA 10-year General Obligation Bond Index Yield (MMAI10Y) when it was at 2.65%. Since then it rose to 3.22%, which is a decent amount (+57 basis points or 21.5%). The Bond Buyer 20-year GO Index (BBWK20GO) went from 3.84% to 4.86% (102 bps, +26.5%). Bond yields have been rising across the board (see GO Yields/Treasury Yields chart below). It doesn't look like MCDX spreads (muni bond credit default swap index that reference revenue and GO bonds) made new highs since my post in July. Charts are after the jump as well three interesting articles.
$MUB (iShares S&P National Municipal Bond Fund) - Stockcharts.com
MMA 10y AAA GO Bond Index Yield (Source: Bloomberg.com)
Bond Buyer 20y GO Index (AA2) (Source: Bloomberg.com)
MMA10y GO Index Yield vs. 10y Treasury Yield (Bloomberg.com)
Munis Offer ‘Strongest’ Debt Return in ’11, BofA Says - BusinessWeek
Pimco’s Gross Puts $4.4 Million Own Money on Muni Bond Rebound - BusinessWeek
Detroit Is Halting Garbage Pickup, Police Patrols In 20% Of City: Expect Bankruptcy In 2011 - Business Insider