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 saw large declines.
- Muni bond funds continued inflows for the second week in a row.
- Be sure to review our previous week’s report to track the changing economic situation.
Deal Gets Passed to Avoid Government Shutdown
- President Trump and Democratic leaders signed a bipartisan deal to raise the government’s debt ceiling, keeping the government running till the next fiscal year, and sanctioned additional aid to both disaster relief areas in Texas and Florida.
- Federal Reserve Vice Chair Stanley Fischer, who is number two at the Fed, announced his resignation for around October 13 of this year. Fischer stated that he is resigning for personal reasons and has been known to be a large supporter of Fed Chair Janet Yellen.
- The international trade deficit widened slightly to $43.7 billion in July, slightly better than the consensus amount of $44.6 billion. Exports fell 0.3% overall, but there were gains in both aircraft and food products. Imports fell 0.2%, reflecting a decline in petroleum, autos & industrial supplies.
- Jobless claims saw a huge increase of 62,000 this week to a total of 298,000. This was far higher than the consensus number of 241,000 due to the aftermath of Hurricane Harvey last week, as more than 50,000 claims came from Texas. The four-week average increased, settling at 250,250.
- The Fed’s assets increased by $1.1 billion this week, bringing the total level to around $4.453 trillion. The weekly increase is centered in other assets, which rose $1.3 billion.
- During the week, money supply (M2) increased by $7.6 billion, the third increase in a row.
Keep track of economic indicators that might impact the muni market.
Treasury and Municipal Bond Yields All Drop
- Treasury yields saw big drops this week with the 2-year Treasury decreasing by 8 bps to yield 1.26%. The 10-year Treasury yield dropped 12 bps and is yielding 2.05%. The 30-year Treasury yield also saw a big drop of 11 bps to 2.67%. Municipal yields also dropped this week with the 2-year AAA-rated bond yield dropping 1 bps to 0.84%. The 10-year AAA-rated bond yield decreased 6 bps to 1.79%, while the 30-year yield fell 4 bps and is yielding 2.71%.
- Credit spreads were also mixed this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal remaining declining by 8 bps from last week, to settle at 53 bps. The spread between the 30-year securities decreased by 7 bps this week.
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 | 1.26% | 0.84% | 42 |
5-year | 1.63% | 1.10% | 53 |
10-year | 2.05% | 1.79% | 26 |
30-year | 2.67% | 2.71% | -4 |
Muni Bond Funds Continue to See Inflows
- Muni bond funds saw inflows for the second week in a row, gaining $248 million.
Tampa-Hillsborough County Expressway Authority Issues Revenue Bonds Series
The largest issue of the week came from the Tampa-Hillsborough County Expressway Authority of Florida, which issued over $157 million in revenue bonds. The bonds are designed to fund the 2017 Series Project, which consists of the acquisition and construction of the existing Expressway System’s Lee Roy Selmon Expressway in South Tampa. The bonds are rated A2 by Moody’s and A+ by S&P. To browse credit reports of other muni bonds issued by Florida, click here.
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Rating Decision Updates on Muni Bonds
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Moody’s Upgrades Philadelphia School District, PA’s Rating to Ba2; Outlook Positive: The Philadelphia School District in Pennsylvania had $3.0 billion of debt upgraded this week to Ba2 from Ba3. This bond upgrade affects both general obligation and lease revenue bonds of the area. The area has seen improvements to its financial position, thanks to experienced management. To explore additional credit reports about other muni bonds issued by the State of Pennsylvania, click here.
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Moody’s Downgrades Saginaw-Midland Municipal Water Supply Corp. (MI) Revenue Bonds to Baa2; Outlook Negative: The Saginaw-Midland Municipal Water Supply Corporation of Michigan had $5.6 million of its senior lien water revenue bonds downgraded to Baa2 from Baa1. The downgrade is related to the area’s weak financial status caused by limited liquidity and a high debt burden. To explore additional credit reports about other muni bonds issued by the State of Michigan, 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 here.
