Weekly Market Update: March 11, 2010

Medium/Long-Term Rates: The BBI-20 remained unchanged at 4.34. The 20-year AAA MMD ended unchanged at 3.78%. The 10-year Treasury increased by 12 bp to 3.73% and the 30-year Treasury increased by 10 bp to 4.66%.

Short-term Rates: The SIFMA Index reset at 0.23%, an increase of 6 bp from the previous week. The 1-month LIBOR Index reset at 0.23%, unchanged from the previous week. The spread between the 1-month Treasury and 1-month LIBOR narrowed by 3 bp to 11 bp for the week.

Commentary: Treasury yields decreased between 5 bp and 13 bp throughout the curve, and predominantly in the 5-year to the 10-year maturity range. Tax-exempt Municipal yields decreased between 1 bp to 3 bp in the 3-year to the 7-year maturity range. The 10-year Municipal to Treasury yield ratio decreased to 75% from 78%, and the 30-year ratio decreased to 89% from 91%.

Municipal new issue volume was moderate, and was distributed with confident tone to retail, traditional and bond fund buyers. Secondary market activity exhibited good to strong follow-through. Continued cash support and preference for short sector maturities continued to support narrowing spreads for lower underlying rated issuer names.

The new issue calendar for the coming week is light to moderate. The Bond Buyer 30-day visible supply indicates $8.28 billion in negotiated sales and $1.75 billion in competitive sales. Economic release data for the week include Housing Starts, Producer Price Index, Jobless Claims, CPI, and Leading Indicators.

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