Weekly Market Update: July 22, 2010

Medium/Long-term Rates: For the period ending July 22, the BBI-20 decreased 11 bp to 4.26%. The 20-year AAA MMD decreased 2 bp to 3.67%. The 10-year Treasury decreased 4 bp to 2.96% and the 30-year Treasury decreased 2 bp to 3.95%.

Short-term Rates: The SIFMA Index reset at 0.29%, a 3 bp increase from July 15. The 1-month LIBOR Index reset at 0.33%, a 1 bp decrease one week ago. The spread between the 1-month Treasury and 1-month LIBOR remained at 18 bp, unchanged for the week.

Commentary: Municipals were again firmer last week amid moderate secondary trading activity. Short to intermediate yields were strongest as the 3-year AAA MMD picked up 6 bp, the 5-year picked up 10 bp, and the 10-year picked up 5 bp. On July 22, high-grade yields in the 2- to 10-year range touched their lowest levels in the last ten years.

The Treasury market posted moderate gains last week as investors searched for direction through a range of conflicting economic indicators. On Tuesday, the Commerce Department reported a decline in June housing starts, and Wednesday’s sober testimony from Federal Reserve Chairman Bernanke exacerbated concerns of softening U.S. economic activity. Equity markets recovered on Thursday, however, as several Dow Jones components posted better-than-expected sales and profits and issued upbeat guidance for the remainder of the year. For the week, the 10-year Municipal to Treasury yield remained at 87% while the 30-year ratio edged 1 bp higher to 101%.

The Bond Buyer 30-day visible supply includes $7.278 billion in negotiated sales and $3.759 billion in competitive sales. The Treasury will sell $189 billion this week with terms ranging from three months to seven years. July Consumer Confidence numbers will be released on Tuesday. On Wednesday, the Commerce Department will provide June Durable Goods Orders and on Friday, Commerce will release Advance GDP guidance for the second quarter.

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