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 and municipal yields continued to rise.
- Muni bond funds registered outflows after 5 weeks of inflows.
- Be sure to review our previous week’s report to track the changing market conditions.
Aftermath of Hurricanes Affects Economy
- The employment situation data was released on Friday and looked to have been affected by the hurricanes last month. Nonfarm payrolls saw a month-over-month decline of 33,000, far lower than consensus of 100,000. Private payrolls also saw a month-over-month decline of 40,000, also falling below the expected amount of 117,000. However, unemployment levels were better than the consensus, reporting at 4.2% versus the expected 4.4% level.
- Wage growth was higher than expected, showing a gain of 0.5% on a month-over-month change and 2.9% on a year-over-year basis. This positive news further substantiates plans that the Fed will most likely raise rates in December’s meeting. This caused the 2-year Treasury to spike to an intraday level of 1.51%, the highest level since October 2008.
- International trade deficit came in near expectations at negative $42.4 billion, slightly lower than the expected negative $42.5 billion. Exports rose 0.4% to $195.3 billion, while imports declined 0.1% to $237.7 billion.
- ADP Employment report for September was lower than expected at 135,000 versus the expected 140,000. Although down from August’s 228,000 report, this is most likely contributed to the job losses created by Hurricanes Harvey and Irma.
- Jobless claims saw a decrease of 12,000 this week, to a total of 260,000. This was lower than the consensus amount of 265,000, but still high due to claims from Texas and Florida from the hurricanes. The four-week average decreased this week, settling at 268,250.
- The Fed’s assets increased by $4.8 billion this week, bringing the total level to around $4.460 trillion. The weekly increase is centered in central bank liquidity swaps, which rose $3.6 billion.
- During the week, money supply (M2) increased by $15.4 billion, a reversal from last week’s decrease of $13.8 billion.
Keep track of economic indicators that might impact the muni market.
Treasury and Municipal Bond Yields Mostly See Gains
- Treasury yields continue to increase with the 2-year Treasury increasing by 2 bps to yield 1.50%. The 10-year Treasury yield moved up 2 bps and is yielding 2.36%. The 30-year Treasury yield gained 3 bps to 2.89%. Municipal yields also increased this week, with the exception of the 30-year. The 2-year AAA-rated bond yield increased 2 bps to yield 1.04%. The 10-year AAA-rated bond yield increased 3 bps to 2.03%, while the 30-year yield remained unchanged this week and is yielding 2.90%.
- Credit spreads saw minimal movement again this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond decreasing by 1 bps to settle at 56 bps. The spread between the 30-year securities tightened by 3 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.
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Muni Bond Funds Breaks Five-Week Inflow Streak
- Muni bond funds broke a five-week inflow trend with $212 million of outflows.
Greater Orlando Aviation Authority Issues Subordinated Airport Revenue Bonds Series
The largest issuance of the week comes from the Greater Orlando Aviation Authority in Florida, which issued over $923 million of Subordinated Airport Facilities, Series 2017A revenue bonds. The project is meant to finance a portion of the South Terminal Complex of the Orlando airport. The bonds are rated A1 by Moody’s. To browse credit reports of other muni bonds issued by Florida, click here.
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Rating Decision Updates on Muni Bonds
Moody’s Upgrades to Aa3 Laredo, TX Water & Sewer Enterprise Revenue Bonds; Outlook Stable: The Laredo Water & Sewer System of Texas had its senior lien revenue bonds upgraded to Aa3 from A1. Moody’s also assigned Aa3 rating to $21.8 million of the Waterworks and Sewer System Revenue Improvement Bonds, Series 2017. These upgrades affect over $237 million outstanding bonds and were caused by the area’s large and growing customer base and excellent rate management practices. To explore additional credit reports about other muni bonds issued by the State of Texas, click here.
Moody’s Downgrades Electra ISD’s TX GOULT to Baa1; Assigns Negative Outlook: The Independent School District of Electra, Texas had $12 million of outstanding bonds downgraded to Baa1 from A3. The area was highly dependent on the area’s oil and gas industry, which has been on the decline in the last few years.
We provide this report on a weekly basis. To stay up to date with muni bond market events, return to our News page here.