• Treasury and municipal yields all saw gains this week.
• Muni bond funds returned to inflows this week.
• Be sure to review our previous week’s report to track the changing market conditions.

• The Employment Situation Report was released on Friday to much higher-than-expected results. Non-farm payrolls blew away the consensus of 205,000 with a month-over-month increase of 313,000. Private payrolls also beat expectations of 195,000 with a month-over-month increase of 287,000. The unemployment level remains at 4.1%, which was slightly higher than the consensus of 4.0% but is still a very good sign.

• The ADP Employment Report was considerably higher than the consensus of 205,000 and reported 235,000 for the month of February. Although this report tends to run on the higher end, it is a clear indication that the job market is very strong.

• The Bloomberg Consumer Comfort Index grew 0.6 from last month’s measure to 56.8, which shows consumers are growing more comfortable even though February saw a lot of volatility in the stock market.

• Jobless claims saw a larger increase of 21,000 this week to a total of 231,000, which is higher than the consensus amount of 220,000. This week’s measure is up from last week’s , which was a 49-year low. The four-week average also increased by 2,000 to 222,500.

• The Fed’s assets increased by $2.7 billion this week, bringing the total asset base to around $4.396 trillion. This level is down $64 billion from the beginning of the balance sheet unwinding in October 2017.

• During the week, money supply (M2) increased by $32.1 billion, a reversal of last week’s $5.0 billion decrease.

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

• Treasury yields were all up this week, with the 2-year Treasury increasing by 2 bps to 2.26%. The 10-year Treasury saw a gain of 3 bps and now yields 2.89%, while the 30-year Treasury yield increased by 2 bps and now yields 3.16%. Municipal yields also gained this week, with the 2-year AAA-rated bond increasing 1 bps to yield 1.57%. The 10-year AAA-rated bond increased by 3 bps to yield 2.51%, while the 30-year AAA-rated bond yields increased by 4 bps to yield 3.12%.

• Credit spreads grew this week, with the largest spread between the 2-year Treasury and the AAA-rated municipal bond now standing at 69 bps. Meanwhile, the spread between the 30-year securities decreased to 4 bps from the previous week’s figure of 6 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.

After $592 million of outflows last week, muni bonds saw a bounce back in inflows with an increase of $505 million in assets under management.

The largest issue of the week comes from the Los Angeles Unified School District of Los Angeles, California. One issue consists of the Election of 2005 Series M-1 and M-2, which issued $130 million general obligation bonds. The other consists of the Election of 2008 Series B-1 and B-2, which issued $1.22 billion general obligation bonds. Both issues are considered Dedicated Unlimited Ad Valorem Property Tax Bonds and are rated AAA by Fitch. Both the Series M-2, which makes up over $12 million, and the Series B-2, which makes up over $134 million, are federally taxable.

Upgrade

Moody’s Upgrades Canyon County School District 131 (Nampa), ID’s GO rating to A1: The Canyon County School District 131 of Nampa, Idaho, had its general obligation bonds upgraded by Moody’s to A1 from A2 this week. The area’s financial status has improved due to management’s strong policies and focus to improve the district’s reserves. This upgrade affects over $87 million in outstanding general obligation debt.

Downgrade

Moody’s Downgrades Athens, AL’s Issuer and GOLT Rating to Aa3 from Aa2: The city of Athens, Alabama, had $20 million of its general obligation warrants, as well as both its issuer and general obligation unlimited tax rating, downgraded to Aa3 from Aa2. The city has taken on an above-average debt burden even though it has a moderately sized tax base and a relatively stable financial position.

We provide this report on a weekly basis. To stay up to date with muni bond market events, return to our News page here.