US Municipal Bonds: Through Thursday October 21st, the broad municipal bond market as represented by the S&P National AMT-Free Municipal Bond Index saw yields rise by 2 basis points for the month and results in a 7.3% year-to-date total return. The tax-exempt yield to maturity of this index is a 3.48 and when looked at from the perspective of taxable equivalent yield is a 5.33% at a 35% tax rate.…
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I like to keep the municipal bond returns in context – the S&P 500 Total Return Index through October 21st was a positive 7.54 percent and US Treasury bonds as measured by the S&P/BGCantor US Treasury Bond Index recorded a total return of 7.64 percent. A return of 7.3% for tax-exempt municipal bonds is still a good showing.
High yield municipal bonds have been a sector that have been outperforming all year. Credit spreads narrowed so far in 2010 and this sector benefits the demand seen for the high coupons these bonds provide. The result has been a total return through October 21st for the S&P/Investortools High Yield Municipal Bond Index of over 12.15%.
Weighted Avg Coupon Weighted Avg Maturity Weighted Avg Yield To Maturity Yield Change For Month Taxable Equivalent Yield 5 Index Value MTD Change QTD Change YTD Change Bloomberg Ticker
S&P National AMT-Free Municipal Bond Index 1 4.61% 10/15/2024 3.48% 2bps 5.35% 120.09 -0.04% -0.04% 7.30% SPMUNUST
S&P California AMT-Free Municipal Bond Index 1 4.62% 3/15/2025 3.61% -6bps 5.55% 120.23 -0.07% -0.07% 9.22% SPMUNCAT
S&P New York AMT-Free Municipal Bond Index 1 5.01% 10/30/2025 3.58% -1bps 5.51% 120.77 -0.13% -0.13% 6.69% SPMUNNYT
S&P Short Term AMT-Free Municipal Bond Index 2 5.04% 8/25/2012 1.06% 4bps 1.63% 108.60 -0.17% -0.17% 2.32% SPMU5YRT
S&P National AMT-Free Municipal VRDO Index 3 n/a 7 Days 0.33% 1bps 0.51% 100.44 0.02% 0.02% 0.24% SPMUVRDO
S&P AMT-Free Municipal Series 2012 Index 4 4.63% 6/1/2012 0.66% 0bps 1.02% 102.52 0.04% 0.04% 1.77% SPMUS12T
S&P AMT-Free Municipal Series 2013 Index 4 4.66% 7/1/2013 0.91% 0bps 1.40% 103.86 0.04% 0.04% 2.95% SPMUS13T
S&P AMT-Free Municipal Series 2014 Index 4 4.63% 7/1/2014 1.18% 2bps 1.82% 104.89 0.00% 0.00% 3.99% SPMUS14T
S&P AMT-Free Municipal Series 2015 Index 4 4.62% 6/30/2015 1.49% -3bps 2.29% 105.79 0.19% 0.19% 5.79% SPMUS15T
S&P AMT-Free Municipal Series 2016 Index 4 4.65% 6/30/2016 1.81% -5bps 2.79% 106.69 0.38% 0.38% 7.68% SPMUS16T
S&P AMT-Free Municipal Series 2017 Index 4 4.64% 7/1/2017 2.11% -8bps 3.24% 107.20 0.58% 0.58% 8.75% SPMUS17T
S&P AMT-Free Municipal Series 2018 Index 4 4.59% 6/30/2018 2.36% -8bps 3.62% 107.94 0.62% 0.62% 9.93% SPMUS18T
S&P AMT-Free Municipal Series 2019 Index 4 4.56% 6/30/2019 2.63% -4bps 4.04% 107.94 0.43% 0.43% 10.40% SPMUS19T
S&P Taxable Municipal Bond Index 5.30% 9/30/2028 5.10% 10bps 5.10% 108.77 -1.29% -1.29% N/A SPMUTT
S&P L/T Intermediate Taxable Municipal Index 4.46% 6/30/2020 4.41% -1bps 4.41% 110.68 0.23% 0.23% N/A SPMUTLT
S&P Municipal BAB Select Index 6.27% 7/30/2038 5.91% 22bps 5.91% 109.62 -2.81% -2.81% N/A SPMUTBST
1 Index Inception September 2007
2 Index Inception September 2008
3 Index Inception August 2009
4 Index Inception October 2009
5 Taxable Equivalent Yield based upon 35% tax rate
US Leveraged Loans:
Technicals for the loan market are as good as at any point this year. The new issue calendar is very strong and deals continue to be over subscribed. With new money flowing into loan mutual funds and some whispers of new deals in the CLO market, the loan markets continue to move higher. Bid prices for the S&P/LSTA U.S. Leveraged Loan 100 Index have closed over 91 every day since October 13th and have been higher than 90 since mid September. Bid prices for the S&P/LSTA Performing Loans Index are now north of 94.
The S&P/LSTA U.S. Leveraged Loan 100 Index has continued its upward climb, returning +1.32% this month following a greater than 4% return in the 3 rd quarter. The year to date gain is now over 7%. The broader S&P/LSTA Leverage Loan Index (LLI) is up just over 1% this month, nearly +8% on the year. As a comparison, the S&P CDS High Yield Rolling Index is up 1.3% this month, over 2% on the year. The S&P/LSTA Performing Loans Index is now over 8% on the year.
Weighted Average Bid Price on Total Return
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
S&P/LSTA U.S. Leveraged Loan 100 (LL100) 91.03 90.46 88.35 91.76 87.68 1.32% 4.11% -2.59% 4.23% 7.10%
S&P/LSTA Leveraged Loan (LLI) 92.31 91.59 89.84 91.57 87.35 1.07% 3.32% -1.24% 4.64% 7.91%
S&P/LSTA Performing Loans 94.08 93.29 91.35 93.47 89.82 1.07% 3.49% -1.39% 4.72% 8.01%
S&P CDS U.S. High Yield Rolling Index n/a n/a n/a n/a n/a 1.30% 2.16% -3.16% 2.08% 2.31%
Bloomberg Tickers:
S&P/LSTA U.S. Leveraged Loan 100 Index: total return index value: SPBDLL
S&P/LSTA U.S. Leveraged Loan 100 Index: weighted average bid price: SPBDLLB
S&P/BGCantor U.S. Treasury Indices:
Yields at the long end of the curve continued to rise this week while yields for Bills and short dated bonds fell. Yields for the S&P/BGCantor 20+ Year U.S Treasury Bond Index rose another 5 bps, up 27 bps since end of September. With the belly of the curve seeing the biggest drop in yields this month, mid maturity bonds have produced the best returns in October.
The S&P/BGCantor 20+ Year Treasury Bond Index is down 0.85% this week, over -4% this month. The year to date return is still north of 16%, but well shy of the levels seen earlier in the year. The mid maturity indices have fared better this month with the S&P/BGCantor 3-5 Year U.S. Treasury Bond Index up 0.56% and the S&P/BGCantor 5-7 Year U.S. Treasury Bond Index up +0.62
Index Yield to Maturity as of Total Return
10/21/2010 9/30/2010 6/30/2010 3/31/2010 1/4/2010 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
S&P/BGCantor U.S. Treasury Bill 0.14 0.15 0.16 0.16 0.1 0.01% 0.06% 0.06% 0.04% 0.17%
S&P/BGCantor U.S. Treasury Bond 1.14 1.19 1.5 2 2.17 0.02% 2.29% 4.16% 1.01% 7.64%
S&P/BGCantor 0-3 Month U.S. Treasury Bill 0.14 0.13 0.15 0.13 0.05 0.01% 0.04% 0.03% 0.01% 0.09%
S&P/BGCantor 6-9 Month U.S. Treasury Bill 0.18 0.20 0.22 0.26 0.2 0.02% 0.08% 0.11% 0.09% 0.30%
S&P/BGCantor 1-3 Year U.S. Treasury Bond 0.35 0.41 0.6 0.97 1.06 0.18% 0.63% 1.26% 0.71% 2.81%
S&P/BGCantor 3-5 Year U.S. Treasury Bond 0.84 0.96 1.44 2.12 2.18 0.56% 2.50% 3.89% 1.29% 8.47%
S&P/BGCantor 5-7 Year U.S. Treasury Bond 1.55 1.64 2.2 3.03 3.04 0.62% 3.89% 6.00% 1.65% 12.63%
S&P/BGCantor 7-10 Year U.S. Treasury Bond 2.30 2.31 2.77 3.65 3.64 0.25% 4.49% 8.08% 1.53% 14.95%
S&P/BGCantor 10-20 Year U.S. Treasury Bond 3.10 2.98 3.42 4.25 4.3 -1.07% 5.50% 9.93% 1.72% 16.71%
S&P/BGCantor 20+ Year U.S. Treasury Bond 3.93 3.66 3.88 4.69 4.63 -4.24% 4.84% 16.02% 0.15% 16.64%
S&P/Citigroup International Treasury Bond (Ex U.S.) Indices:
The dollar rebounded somewhat this week, but is still down over 1.5% this month. Yields for both the S&P/Citigroup International Treasury Bond (Ex U.S.) Index and the S&P/Citigroup International Treasury Bond (Ex U.S.) 1 to 3 Year Index have dropped 3 bps and 5 bps respectively since the end of September. A falling dollar and dropping yields have been positive for USD investors in this asset class. The composite index is up over 2% this month bringing the YTD return to just over 7%. The 1 to 3 year index is up over 4% on the year.
Index Index Level as of Total Return
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
Intl Treasury ex US 236.280 230.780 206.510 215.700 220.720 2.38% 11.75% -4.26% -2.27% 7.05%
Intl Treasury ex US 1-3yr 212.160 206.950 187.900 197.660 203.710 2.52% 10.14% -4.94% -2.97% 4.15%
DXY – USD spot index 77.460 78.720 86.019 81.073 77.860 -1.60% -8.49% 6.10% 4.13% -0.51%
Yield to Maturity on bps change in
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
Intl Treasury ex-US YTM 2.54 2.57 2.54 2.41 2.49 -0.03 0.03 0.13 -0.03 0.05
Intl Treasury ex-US 1-3 YTM 1.58 1.63 1.53 1.18 1.26 -0.05 0.10 0.35 -0.06 0.32
Bloomberg Tickers:
S&P/Citigroup International Treasury Bond Ex-US Index: total return index value: SPBDXUTR
S&P/Citigroup International Treasury Bond Ex-US Index 1-3 years: total return index value: SPBDXU3T
S&P International Corporate Bond Index:
As seen in the international treasury bond market, the positive effect of a falling dollar has pushed the S&P International Corporate Bond (ICB) Index higher in October. Yields for the ICB Index reversed course this week and are now 12 bps higher on the month. Yields for ICB are down 39 bps this year compared to a 5 bps increase for S&P/Citigroup International Treasury Bond (Ex U.S.) Index. The relative change in yields for the international corporate bond market compared to international treasuries have led to the outperformance of the ICB index over the international treasury indices this year.
Index Index Level as of Total Return
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
Intl Corporate Bond TR 108.260 106.450 94.670 98.630 100.000 1.70% 12.44% -4.02% -1.37% 8.26%
DXY – USD spot index 77.460 78.720 86.019 81.073 77.860 -1.60% -8.49% 6.10% 4.13% -0.51%
Yield to Worst on bps change in
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
Intl Corporate Bond YTW 3.50 3.38 3.64 3.61 3.89 0.12 -0.26 0.03 -0.07 -0.39
Bloomberg Tickers:
S&P International Corporate Bond Index: total return index value: SPBDICBT
US Credit Default Swaps:
As equity markets continued their rally this week, spreads for the broad benchmark S&P CDS Indices tightened across the credit spectrum. CDS spreads for the companies captured in the S&P CDS U.S. High Yield Index have come in 35 bps since the end of September. With spreads dropping, the total return of the high yield index is 1.3% month to date, up over 2% this year.
What’s going on in the Homebuilders sector? Unlike the benchmark CDS indices, spreads for the S&P CDS U.S. Homebuilders Sector Index widened by 7 bps this week, up 15 bps since end of September. On the year, the homebuilders index is the worst performing in the S&P CDS family, down over 2%. Perhaps the recent turmoil the in home finance market is spilling over to the building sector.
Index Weighted Average Market Spread as of Spread % Change in
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
S&P 100 CDS 73 77 88 68 55 -5.2% -12.5% 29.4% 23.6% 32.7%
S&P CDS US Investment Grade 115 120 135 100 88 -4.2% -11.1% 35.0% 13.6% 30.7%
S&P CDS US High Yield 457 492 535 453 450 -7.1% -8.0% 18.1% 0.7% 1.6%
S&P CDS US Homebuilders 329 314 300 227 245 4.8% 4.7% 32.2% -7.3% 34.3%
Index Index Level as of Total Return
10/21/2010 9/30/2010 6/30/2010 3/31/2010 12/31/2009 MTD 3rd Qtr 2nd Qtr 1st Qtr 2010
S&P 100 CDS Rolling 102.98 102.77 102.19 103.15 103.22 0.20% 0.56% -0.93% -0.06% -0.23%
S&P CDS US IG Rolling 106.38 106.27 105.42 107.11 107.02 0.10% 0.80% -1.57% 0.08% -0.60%
S&P CDS US HY Rolling 118.36 116.84 114.37 118.10 115.69 1.30% 2.16% -3.16% 2.08% 2.31%
S&P CDS US Homebuilders Rolling 109.43 110.22 110.59 114.39 111.77 -0.71% -0.34% -3.32% 2.34% -2.09%
S&P 100 (equity) TR – OEX 901.24 868.35 784.57 892.59 853.28 3.79% 10.68% -12.10% 4.61% 5.62%
Bloomberg Tickers:
S&P 100 CDS Rolling Index: total return index value: SPCDOR50
S&P CDS US Investment Grade Rolling Index: total return index value: SPCDIR50
S&P CDS US High Yield Rolling Index: total return index value: SPCDHR50
S&P CDS US Homebuilders Sector Rolling Index: total return index value: SPCDBR50
Director of Global Index Communications
Standard & Poor’s
Source: ETFWorld – Standard & Poor’s
JR Rieger, Vice President of Fixed Income Indices at S&P
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