MunicipalBonds.com provides information regarding the performance of muni bonds for the past week in comparison with Treasury yields and net fund flows, as well as the impact of monetary policies and relevant economic news.
- Treasury yields remained mostly flat last week.
- Muni bond funds continued to see a seventh week of inflows.
- Credit spreads between the 30-year Treasuries and AAA-rated municipal bonds widened from the previous week.
- Be sure to review our previous week’s report to track the changing economic situation.
GDP Beats Expectations
- New Home Sales came in lower than expected at 569,000, which is lower than the consensus 602,000. However, the three-month average measure for the month of April (i.e. 606,000) was marginally lower than March’s figure of 611,000.
- Jobless claims data had a slight increase of 1,000 jobs, bringing the total to 234,000 for the week. The job market remains strong with this measure continuing to be lower than the consensus amount of 237,000. This also brings down the four-week average to 235,250.
- GDP data was released on Friday and the quarter-over-quarter change reported at 1.2%, which beat expectations of a 0.8% increase. This was centered on the positive results of consumer spending, which doubled to 0.6% compared to last quarter.
- The Bloomberg Consumer Comfort Index increased 7 bps to 50.9, given the positive sentiment around job market and the overall economy.
- The International Trade in Goods showed a decline of $67.6 billion this week, widening $2.5 billion from the April report of -$65.1 billion. Exports continued to show weakness, declining 0.9%, while imports saw an increase of 0.7%.
- Fed policymaker James Bullard spoke Friday and announced that the path of inflation for the U.S. is worrisome and that the Fed’s plan for raising rates is too aggressive.
- Last week, the Fed’s balance sheet increased by $3.7 billion in assets, bringing the total level to around $4.47 trillion. The weekly increase is centered in mortgage-backed securities, which rose by $2.3 billion.
- During the week, money supply (M2) increased by $25.2 billion, a reversal from last week’s $15.0 billion decrease.
Keep track of economic indicators that may impact the muni market.
Treasuries Remain Flat, While Municipal Yields Fall
- Almost all Treasury yields remained unchanged last week. While the 2- and 10-year Treasury yields remained flat, the 30-year Treasury yield increased marginally by 1 bps to 2.91%. Municipal yields demonstrated larger declines, with the 2-year yield dropping by 2 bps to 0.91% and the 30-year yield dropping by 6 bps to 2.82%.
- Credit spreads showed some movement, with the largest spread between the 5-year Treasury and the AAA-rated municipal climbing to 51 bps. With the decline in the 30-year muni bond yield, the spread between this instrument and its Treasury counterpart increased by 7 bps to reach 9 bps for the week.
Be sure to check our Market Activity section to keep track of daily muni trades and historical trades of muni CUSIPs across the U.S.
2-Year Yield Movement
10-Year Yield Movement
30-Year Yield Movement
|Maturity||Treasury Yield||Muni Yield||Spread (in BPS)|
Muni Bond Funds See Inflows for Seventh Consecutive Week
- For the seventh week in a row, municipal bond funds show inflows that amounted to $344 million this week.
Los Angeles Unified School District Issues New Series of General Obligation Refunding Bonds
The biggest issue of the week was through the Los Angeles Unified School District that issued over $1.08 billion in General Obligation Refunding bonds. The bonds are rated AAA by Fitch and Aa2 by Moody’s and are secured and payable from ad valorem property taxes to be levied within the district. To browse credit reports of other muni bonds issued by the State of California, click here.
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Rating Decision Updates on Muni Bonds
Moody’s Upgrades East Central ISD, TX’s GOs to Aa2: The East Central Independent School District of Texas had over $43 million of Unlimited Tax School Building Bonds upgraded to Aa2 from Aa3. This is due to the growing tax base in the San Antonio area as well as having a manageable pension liability. To explore additional credit reports about other muni bonds issued by the State of Texas, click here.
Moody’s Downgrades Hayfield MN’s GO Bonds to Ba3 from Ba2; Outlook Negative: The rating of the City of Hatfield, Minnesota’s general obligation bonds were downgraded to Ba3 from Ba2 this week. This affects $6.4 million of debt outstanding and is due to the risks posed by the city’s senior care facility, which is much larger than what was anticipated. To explore additional credit reports about other muni bonds issued by the State of Minnesota, click here.
We provide this report on a weekly basis. To stay up to date with muni bond market events, return to our News page here.