Rieger Report: Muni Market’s Moot Reaction to Bond Insurers Credit Watch Negative

So far, the municipal bond market has seen only a modest reaction to the recent negative credit watch being placed on the ratings of several bond insurers.

Month to date as of June 12, 2017, the S&P Municipal Bond Insured Index tracking over $148billion in par value of insured bonds has performed in sync with the overall market.  The insured bond index has an average yield that is higher than the broader S&P Municipal Bond Investment Grade Index which tracks over $1.5trillion in par value.  As an additional validation, the insured bond market performance as compared to larger more liquid bonds in the S&P National AMT-Free Municipal Index also seems to be at a parity, at least so far in June.

Year to date the higher yielding bonds in the S&P Municipal Bond Insured Index have contributed to outperformance verses the rest of the investment grade market place.

Table: Select municipal bond indices, their yields and returns:

Source: S&P Dow Jones Indices, LLC. Data as of June 12, 2017. Chart is provided for illustrative purposes. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

For more information on S&P’s bond indices including methodologies and time series information please go to SPDJI.com.

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