• Treasuries and muni yields decreased across all maturities for second week in a row.

• Muni bond funds see inflows after two weeks of outflows.

• Be sure to review our previous week’s report to track the changing economic situation.

• Jobless claims fell by a sharp 15,000 jobs and brings the total to 233,000 for the week. This was considerably lower than the consensus number of 246,000. With a slight decrease in the four-week average figure to 243,750, this week’s claims reflect that the job market is still very strong.

• Import and export prices came in flat this week, just like consumer inflation. Import prices came in at the consensus amount of negative 0.2% on a month-over-month basis. Exports came in slightly lower than expected, at negative 0.2% versus the consensus estimate of 0%. On a year-over-year basis, imports reported an increase of 1.5% while exports reported a 0.6% increase.

• The Bloomberg Consumer Comfort Index came in strong again at 47.6 and higher than last week’s post-election low level of 47.0. Even though this measure has been leveling off, consumers still feel confident in the economy, thanks to a strong labor market and low unemployment levels.

• Leading indicators beat the high estimate and came in at 0.6% versus the consensus of 0.4%. This higher than expected boost was due to housing permits being higher in June.

• Last week, the Fed’s assets increased by $10.2 billion, bringing the total level to around $4.477 trillion. The weekly increase is centered in mortgage-backed securities, which rose by $9.1 billion.

• During the week, money supply (M2) increased a large amount by $87.5 billion, a reversal from last week’s decrease of $30.8 billion.

Keep track of economic indicators that might impact the muni market.

• Treasury yields decreased this week for the second week in a row. The 2-year Treasury yield decreased 1 bps to 1.34%. The 10-year Treasury yield is also down 8 bps this week and is now yielding 2.24%. The 30-year Treasury yield also declined, down 10 bps to 2.81%. Municipal yields also decreased this week, with the 2-year AAA-rated bonds yield decreasing 7 bps to 0.97%. The 10-year AAA-rated bond yields decreased 10 bps to 1.87%, while the 30-year yield decreased 11 bps and is now yielding 2.71%.

• Credit spreads increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 4 bps to settle at 55 bps. The spread between the 30-year securities increased by 1 bps this week and now stands at 10 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.

• Muni bond funds saw a reversal of the recent two week outflow trend with $291 million in inflows.

The largest issuance of the week was from the New York City Transitional Finance Authority that issued over $1 billion in Building Aid revenue bonds. There are over $812 million in the Series S-1 and over $194 million in the Series S-2. The bonds are designed to fund the Building Aid for various educational-related buildings in New York City. 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 New York City, click here.

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Moody’s Upgrades McKinney ISD, TX to Aa1; assigns Aa1 UND/Aaa ENH to GO Bonds, Ser. 2017: The McKinney Independent School District of Texas had over $82 million of its Unlimited Tax School Building Bonds upgraded to Aa1. Moody’s also assigned an Aaa rating to the bonds reflecting the guarantee of the Texas Permanent School Fund (PSF). The area has seen growing tax bases mixed with a healthy financial reserve level that warranted the upgrade. To explore additional credit reports about other muni bonds issued by the State of Texas, click here.

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Moody’s Downgrades Kentucky to Aa3; Outlook Stable: The Commonwealth of Kentucky had its rating downgraded to Aa3 from Aa2 this week, as well as downgrading several other state-issued bonds. The Commonwealth of Kentucky has one of the heaviest unfunded pension burdens in the country, which was the cause of the downgrade. To explore additional credit reports about other muni bonds issued by the State of Kentucky, click here.

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