U.S. municipal bond yields fall to record lows in supply-starved market
CHICAGO, Aug 14 (Reuters) - Global recession fears drove up U.S. municipal bond prices on Wednesday, pushing yields to record lows that could boost supply by tempting states, cities, schools and other issuers to borrow. Yields on Municipal Market Data's benchmark triple-A scale fell to all-time lows of 1.22% for bonds due in 10 years and 1.87% for 30-year bonds.
Recession worries also sent U.S. Treasury yields tumbling.
Greg Saulnier, a Municipal Market Data analyst, said demand has been strong in the $3.8 trillion tax-free debt market, attracting overseas buyers looking for yield.
"Supply in munis is not keeping up with all that cash and demand," he said.
Since January, money has been pouring into municipal bond funds, which reported record-high weekly net inflows of $2.35 billion in the week ended Aug. 7, according to Lipper.
Year-to-date debt supply of $211.8 billion is up only 6.3% from the year-ago period, although sales jumped to $13.9 billion last week, marking the biggest week for issuance since December 2017, according to Refinitiv data.
California has scheduled the sale of more than $5 billion of bonds in the coming months, including about $2.3 billion of general obligation bonds in early September.
"Record yields will reduce our borrowing costs. But at this point we are not planning to alter our issuances," said Mark DeSio, spokesman for the California Treasurer's Office.
Despite the low yields, the elimination of advance refundings of tax-exempt bonds in the U.S. Tax Cuts and Jobs Act of 2017 is expected to continue to dampen issuance.
"Issuers may move some financings forward but the floodgates will not open as in the past," said David Erdman, Wisconsin's capital finance director. (Reporting by Karen Pierog; Editing by Richard Chang)
© Copyright Reuters Ltd. All rights reserved. The information contained in this news report may not be published, broadcast or otherwise distributed without the prior written authority of Reuters Ltd.