MunicipalBonds.com provides information regarding the performance of muni bonds for the past week in comparison with Treasury yields, net fund flows, as well as the impact of monetary policies and relevant economic news.
- With election results in, the S&P rallied 3.79% for the week as Treasuries dramatically dropped and caused massive gains in yields across all maturities.
- With Treasury prices dropping, Treasury yields widened greatly over municipal yields across all maturities, especially in the 5-year maturity with a 31 bps spread.
Lower Jobless Claims Boost Consumer Sentiments
- The Treasury budget announced a September deficit of $44.2 billion, compared to the $33.4 billion surplus of August. However, this is considerably higher than the September 2015 deficit of $136.6 billion, which was due to gains in income taxes that were up 5% in comparison. As a result of the deficit, the Treasury will be looking to raise funds by selling Treasury notes or bonds. For bond investors, this could potentially lead to lower bond prices and higher yields.
- The Consumer Sentiment Index on Friday showed a measure of 91.6 in a positive trend after the election. This is up over four points from October’s measure of 87.2 and continues to substantiate the country’s positive outlook on the job market.
- The Bloomberg Consumer Confidence Index increased to 45.1 from 44.6, gaining for the third straight week. This figure, which is well over this year’s trend line of 44, has a positive correlation with the strength of the labor market and shows that most consumers have a positive opinion of the economy.
- The Labor Department released the JOLT report that indicated that job openings increased to 5.49 million for September, up from 5.45 million in August. However, hires were down 5.08 million in September from the 5.27 million in August, which indicates that employers are holding on to their existing workforce and are willing to wait for the right person for the job.
- Jobless claims were at 254,000, which were near record lows and below the consensus estimate of 263,000 and lower than last week’s claim of 265,000. The four-week moving average is now at 259,750 and continues the falling two-year trend. To have a quick refresh about last week’s report, read here.
- The Gallup U.S. Consumer Spending measure was released for October and came in at $93, slightly higher and adding to the positive momentum from September’s measure of $91. Expectations are that this will continue to rise for the remainder of the year as the holiday season gets closer.
- The Consumer Credit month-over-month change came in at $19.3 billion, slightly higher than the consensus estimate of $18.7 billion. Although consumer spending may be up, an increasing consumer credit figure indicates higher debt. However, this is a common occurrence during the holiday season.
Credit Spreads Widened Across Maturities Post Presidential Election
- Fed Presidents Robert Steven Kaplan from Dallas and Jeffrey M. Lacker from Richmond spoke on Monday about their viewpoints on interest rates. Kaplan announced he is sticking to his 2% forecast for U.S. economic growth next year and that it is too early to assess the economic policies under the Trump Presidency. However, Lacker believes that the new administration could lead to the Fed raising rates faster than anticipated.
- With election results proclaiming Donald Trump as the next President, Treasury bond prices fell significantly from the week before and drove up rates up to significant highs. Credit spreads widened between all maturities, with the biggest between the 5-year and 10-year. Election results may be a negative for municipal bond investors, as the new President-elect favors lower taxes for the wealthy, making tax-free issues less attractive. Read here to learn more on the President’s tax plans.
2-Year Yield Movement
10-Year Yield Movement
30-Year Yield Movement
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Modest Positive Correction in Muni Fund Flows Over Previous Week
- Weekly municipal fund flows became positive again, with inflows measuring $63 million. This is mostly a modest correction from the year’s largest outflow of over $323 million last week.
Muni Fund Inflows/Outflows
Rating Decision Updates on Muni Bonds
Moody’s Upgrades Golden Beach, FL’s GOULT Bonds to Aa2: There are $11.74 million outstanding of the General Obligation Refunding Bonds, Series 2016. The Miami-based town has had a strong expanding tax base, manageable debt burden and pension profile worthy of an upgrade. To view recent muni bond trades from the state of Florida, click here.
Moody’s Downgrades Emerson College, MA to Baa2 and Assigns Baa2 to Revenue Bonds; Outlook Stable: With over $226 million in outstanding debt, the downgrade is caused by the College’s planned significant increase in debt and large, multi-year capital projects to perform extensive renovations on a new, large student residence facility. To learn about other rating decisions for muni bonds issued by Emerson College, click here.
Using our Moody’s report section, find out what other muni bonds were upgraded or downgraded recently.
We provide this report on a weekly basis. To stay up to date with muni bond market events, return to our news page here.