The stronger than expected employment report caused a sharp reversal in interest rates and set a temporary bottom as rates rose sharply at the end of the week. Municipal bonds outperformed as the technical environment remains strong.
New Issuance was extremely low last week and a record of amount of money is pouring into the market, leaving investors with little to choose from. In addition to a record amount of money from bonds being called, maturing and dividend reinvestment last week witnessed only the second time this year that weekly new cash flows were positive.
US Treasuries rose sharply towards the end of the week:
The Municipal environment continues to enjoy a strong technical position this week with a below average new issuance calendar of approximately $5.5 Billion and lots of cash still on the sideline. There is also a slew of inflation data being released which could set the tone of fixed income markets for the rest of the month.