(Bloomberg) — Municipal bonds rallied after weaker-than-expected job progress raised expectations that the Federal Reserve will begin reducing rates of interest this month to assist the financial system.
Yields on top-rated state and native authorities debt fell alongside these on Treasuries. Charges on 10-year benchmark tax-exempt bonds dropped 8 foundation factors to three.05%, the bottom since April, in keeping with knowledge compiled by Bloomberg, with a better transfer seen in different longer-dated securities.
The beneficial properties got here after the month-to-month employment report confirmed job progress nearly got here to a halt final month and the unemployment fee rose to the best since 2021. The weaker-than-expected knowledge cemented bets the Fed will minimize resume easing financial coverage this month, ending a pause that’s stored its benchmark in a single day fee unchanged for all of this yr as President Donald Trump’s commerce warfare solid uncertainty over the outlook for progress and inflation.
“As we speak’s weaker-than-expected jobs report has strengthen market expectation for a September fee minimize,” mentioned Alice Cheng, director of municipal credit score at Janney Montgomery Scott. “Buyers wish to lock within the comparatively greater yields forward of the coverage easing.”
Buyers now see a quarter-point fee minimize on the Fed’s Sept. 16-17 coverage gathering as a positive factor and anticipate a complete of three such cuts this yr, in keeping with futures contracts.
Municipal debt has underperformed different bonds this yr, with state and native securities gaining simply 0.63%, lagging a 4.85% enhance in US Treasuries and 5.95% return for company bonds.
(Updates yield ranges in second paragraph.)
Extra tales like this can be found on bloomberg.com
