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.
- Muni bond funds saw second consecutive week of outflows.
- Be sure to review our previous week’s report to track the changing economic situation.
Yellen Sets Expectations on Inflation, Rate Hikes and Use of Monetary Policies
- The JOLTS report came in lower than expected, at 5.67 million jobs versus the consensus amount of 5.98 million. ALthough the number did not match expectations, employers have finally caught up to job openings. Hirings shot up 8.3%, which is a new record for the series.
- Federal Reserve Chair Janet Yellen gave her semiannual monetary policy testimony to the House Financial Services Committee. She mentioned that tapering will begin sometime this year, mixed with a gradual amount of rate hikes over the next few years. Yellen also spoke about inflation being below 2% and its being dragged down by some unusual measures like cell phones, gasoline and drugs. However, she advised that she is against using monetary tools in a “mechanical” way to alter inflationary pressure.
- Jobless claims fell by 3,000, which brings the total to 247,000 for the week. This was slightly higher than the consensus number of 246,000. Despite a slight increase in the four-week average figure to 245,750, these numbers still reflect a strong job market.
- The Consumer Price Index was released on Friday and it didn’t show any movement on a month-over-month basis and a 1.6% change on a year-over-year basis. These reports were on the low side of the consensus range and match up to the Fed’s statements about low inflation.
- Last week, the Fed’s assets fell by $0.6 billion, bringing the total level to around $4.467 trillion. The weekly decrease is because of the central bank liquidity swaps that declined by $3.0 billion and other assets that rose by $2.6 billion.
- During the week, money supply (M2) decreased by $30.8 billion, a reversal from last week’s increase of $35.9 billion.
Keep track of economic indicators that might impact the muni market.
Bond Yields Fall Across All Maturities This Week
- Treasury yields decreased this week, after increasing for two weeks in a row. The 2-year Treasury yield decreased 5 bps to 1.35%. The 10-year Treasury yield is also down 7 bps this week and is now yielding 2.32%. The 30-year Treasury yield also declined, down 2 bps to 2.91%. Municipal yields also decreased this week, with the 2-year AAA-rated bonds yield decreasing 2 bps to 1.04%. The 10-year AAA-rated bond yields decreased 5 bps to 1.97%, while the 30-year yield decreased 5 bps and is now yielding 2.82%.
- Credit spreads decreased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal decreasing by 4 bps to settle at 51 bps. The spread between the 30-year securities increased by 3 bps this week and now stands at 9 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% | 1.04% | 31 |
5-year | 1.86% | 1.35% | 51 |
10-year | 2.32% | 1.97% | 35 |
30-year | 2.91% | 2.82% | 9 |
Muni Bond Funds Sees Second Week of Outflows
- Muni bonds funds saw an outflow for the second week in a row, shedding $163 million.
Department of Water and Power of the City of Los Angeles Issues New Revenue Bonds
Los Angeles Department of Water and Power System issued $375 million of revenue bonds this week. The purpose of the bonds is to pay for capital improvements for the city’s water system. The bonds are rated AA- by Fitch, Aa2 by Moody’s and AA- by S&P. 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
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Moody’s Upgrades Grapevine-Colleyville ISD, TX’s GO Bonds to Aa1 from Aa2; Outlook is Stable: The Grapevine-Colleyville ISD of Texas had $479 million of its outstanding debt upgraded to Aa1 from Aa2. The area, which is close to the Dallas-Forth Worth area, has seen a recent increase in its taxable base, reserves and an increase in its liquidity. To explore additional credit reports about other muni bonds issued by the State of Texas, click here.
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Moody’s Downgrades Alaska to Aa3; Outlook Remains Negative: The State of Alaska had its general obligation debt downgraded to Aa3 from Aa2 this week. The state has an ongoing structural budget imbalance, large fixed costs and high pension liability. To explore additional credit reports about other muni bonds issued by the State of Alaska, 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.
