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 were mostly down for the week.
- Muni bond funds broke the five-week positive trend and had outflows.
- Be sure to review our previous week’s report to track the changing economic situation.
Fed Annual Meeting Occurs as Yellen’s Future Remains in Question
- The Fed had its annual meeting in Jackson Hole, WY, wherein Fed Chair Janet Yellen took a very stern stance on financial regulation. This may have caused her future as Fed Chair to end soon, as President Trump and the Republican party have clearly indicated an opposing view.
- New home sales came in lower than expected at 571,000 versus the Econoday estimate of 610,000. However, the two previous months had upward revisions, leading to a very good three-month trend.
- Existing home sales also came in lower than expected at 5.44 million versus the Econoday consensus of 5.565 million. The month-over-month change fell 1.3%, but the year-over-year change remained positive at 2.1%.
- Jobless claims saw a slight increase by 2,000 to a total of 234,000 for the week. This was lower than the consensus number of 237,000, and the four-week average declined to settle at 237,750.
- The Fed’s assets increased by $1.0 billion this week, bringing the total level to around $4.464 trillion. The weekly increase is centered in other assets, which rose $1.6 billion, but were offset by a $1.3 billion decrease in Federal agency debt securities.
- During the week, money supply (M2) increased by $11.5 billion, a continuation of last week’s increase of around $7.3 billion.
Keep track of economic indicators that may impact the muni market.
Bond Yields Mostly See Declines
- Treasury yields fell this week, with the exception of the 2-year Treasury, which increased by 2 bps to yield 1.33%. The 10-year Treasury yield fell 2 bps and is yielding 2.17%. The 30-year Treasury yield also declined 3 bps to 2.75%. Municipal yields all dropped this week, with the 2-year AAA-rated bond yield dropping 1 bps to 0.87%. The 10-year AAA-rated bond yield decreased 2 bps to 1.87%, while the 30-year yield decreased 2 bps and is yielding 2.75%.
- Credit spreads were also mixed this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 1 bps to 61 bps. On the other hand, the spread between the 30-year securities became 0 this week, with both now yielding 2.75%.
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 | 1.33% | 0.87% | 46 |
5-year | 1.76% | 1.15% | 61 |
10-year | 2.17% | 1.87% | 30 |
30-year | 2.75% | 2.75% | 0 |
Muni Bond Funds Break Inflow Streak
- Muni bond funds broke a five-week inflow streak, with $763 million in outflows this week.
San Francisco Bay Area Issues Toll Bridge Revenue Bonds (CA)
The largest issuance of the week was from the Bay Area Toll Authority of the San Francisco Bay Area in California. There were two types of issues, with over $552 million in 2017 Series E, G and H bonds and over $1.4 billion in 2017 Series S-7. The proceeds are to help continue fund the Bay Area Toll Authority, which services seven toll bridges in the San Francisco Bay area. The bonds are rated AA by Fitch, AA by S&P and Aa3 by Moody’s. To browse credit reports of other muni bonds issued by California click here.
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Rating Decision Updates on Muni Bonds
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Moody’s upgrades Adam’s County, PA’s GO debt to Aa2; Outlook is stable: Adams County of Pennsylvania had $36 million of its general obligation Series A, B and C upgraded by Moody’s to Aa2 from Aa3. The county has increased its financial position by having ample reserves and manageable debt levels. To explore additional credit reports about other muni bonds issued by the State of Pennsylvania, click here.
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Moody’s Downgrades Shreveport’s (LA) GOULT to A3; Assigns Negative Outlook: The City of Shreveport, Louisiana, had over $177 million of its outstanding general obligation bonds downgraded to A3 from A2. The city has a limited liquidity position, with high liabilities and growing fixed costs. The economy is also linked to the energy sector, which has softened over the last few years and negatively impacted the local economy. To explore additional credit reports about other muni bonds issued by the State of Louisiana, 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.
