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.
- Treasuries and muni yields decreased across all maturities, except for the 2-year Treasury.
- Muni bond funds saw inflows for the third week in a row.
- Be sure to review our previous week’s report to track the changing economic situation.
Employment Data Shows Sign of Strong Labour Market
- The ADP Employment Report beat expectations this week with a measure of 178,000. Although this was higher than the consensus of 173,000, the figure came out lower than the previously revised figure of 191,000.
- Jobless claims declined 5,000 to a total of 240,000 for the week. This was lower than the consensus number of 244,000. The reading for the four-week average also declined to 241,750.
- The employment situation data was released on Friday and came out better than expected, causing a rise in the U.S. equity markets. For instance, the nonfarm payrolls saw an increase of 209,000, higher than the consensus of 178,000. As expected, unemployment rate registered at 4.3%, while private payrolls saw an increase of 205,000, which was higher than the 175,000 consensus.
- The international trade deficit was better than the consensus amount and came in at negative $43.6 billion versus the expected $44.4 billion. This was also better than last month’s figure of $46.4 billion. The better report was mainly due to exports, especially an increase in cars and food items.
- The Fed’s assets increased by $1.6 billion this week, bringing the total level to around $4.467 trillion. The weekly increase is centered in other assets, which rose $1.4 billion as a $1.3 billion rise in holdings of inflation-protected Treasuries.
- During the week, money supply (M2) had an increase of $12.2 billion, a continuation of last week’s gain of around $6 billion.
Keep track of economic indicators that might impact the muni market.
Bond Yields Mostly See Declines
- Treasury yields all decreased this week with the exception of the 2-year Treasury, which remained unchanged and yields 1.35%. The 10-year Treasury yield decreased 3 bps this week and is now yielding 2.26%. The 30-year Treasury yield also declined 6 bps to 2.84%. Municipal yields all decreased this week, with the 2-year AAA-rated bond yield decreasing 2 bps to 0.96%. The 10-year AAA-rated bond yield decreased 3 bps to 1.87%, while the 30-year yield decreased 3 bps and is now yielding 2.73%.
- Credit spreads continue to increase, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 1 bps to settle at 58 bps. The spread between the 30-year securities decreased by 3 bps this week and now stands at 11 bps.
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.
Credit Spread
| Maturity | Treasury Yield | Muni Yield | Spread (in BPS) |
|---|---|---|---|
2-year | 1.35% | 0.96% | 39 |
5-year | 1.82% | 1.24% | 58 |
10-year | 2.26% | 1.87% | 39 |
30-year | 2.84% | 2.73% | 11 |
Muni Bond Funds Continue Inflows
- Muni bond funds saw inflows for the third week in a row, with an increase of $90 million in assets.
New Jersey Turnpike Authority Issues New 2017 Series Revenue Bonds
The largest issuance of the week was from the New Jersey Turnpike Authority Turnpike, which issued over $646 million Series 2017 B revenue bonds. The bonds are designed to fund the Capital Improvement Program that funds numerous projects for the Turnpike System throughout New Jersey. The bonds are rated A by Fitch and A2 by Moody’s and A+ by S&P. To browse credit reports of other muni bonds issued by the State of New Jersey, click here.
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Rating Decision Updates on Muni Bonds
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Moody’s Upgrades Lee County, IA’s GO Debt to Aa2: The Lee County, Iowa’s general obligation unlimited tax (GOULT) debt was upgraded this week to Aa2 from Aa3. The debt affects over $7 million of outstanding debt and was due to the county having a healthy financial profile thanks to a strong agricultural and manufacturing base. To explore additional credit reports about other muni bonds issued by the State of Iowa, click here.
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Moody’s Downgrades Elkhart, IN’s Tax Increment Revenue Bonds to Baa2; Outlook Stable: The City of Elkhart of Indiana had $6.7 million of its debt downgraded to Baa2 from Baa1. This downgrading is directed specifically toward the tax increment financing revenue bonds because the district has been witnessing declining revenues recently. To explore additional credit reports about other muni bonds issued by the State of Indiana, click here.
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