Lisa Lambert, Reuters
Jun. 21, 2013
(Reuters) – The possibility of rising interest rates rocked the U.S. municipal bond market on Thursday, with prices plunging in secondary trade, investors selling off the debt, money pouring out of mutual funds and issuers postponing nearly $2 billion in new sales.
“The market got crushed,” said Daniel Berger, an analyst at Municipal Market Data, a unit of Thomson Reuters, about the widespread sell-off.
Yields on top-rated 10-year bonds and highly rated 30-years on Municipal Market Data’s benchmark scale both spiked 20 basis points.
Those on 10-years ended the day at 2.48 percent, the highest since October 2011, while those on 30-years closed at 3.78 percent, the highest since December 2011. Yields move inversely to price. Berger said it was the largest one-day yield increase since December 2010.
“It’s a bit of a follow-through from the market’s disappointment from what they were hoping to get from the Fed and a continued reflection to the fragile state of fixed income markets,” said Jonathan Lewis, chief investment officer for Samson Capital Advisors.
On Wednesday, Federal Reserve Chairman Ben Bernanke said the central bank could soon reduce its bond buying if the U.S. economy shows signs of strength. The comments sent the yield on the U.S. 30-year to its highest level since September 2011. Municipal bonds often follow Treasuries.
Continue reading at Municipal Bond Market Rocked As Interest Rates Spike – Business Insider.