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 yields and municipal yields were a mixed bag this week.
- Muni bond fund flows returned to inflows.
- Be sure to review our previous week’s report to track the changing market conditions.
Fed Raises Rates 0.25% as Expected
- The Federal Reserve Open Market Committee met this week, and as expected, rose rates by 0.25%. The federal funds target rate is now set at 1.25% to 1.50%. The general consensus is that the Fed will most likely raise rates two to three more times in 2018 under the new Fed Chair Jerome Powell.
- The Job Openings and Labor Turnover Survey (JOLTS) reported 5.996 million job openings, falling 2% from October’s reading. Hires also rose to 5.552 million.
- Consumer Price Index showed a month-over-month change of 0.4%, thanks to higher gasoline prices. CPI also showed a 2.2% reading on a year-over-year basis.
- Jobless claims decreased by 11,000 this week to a total of 225,000, much lower than the consensus amount of 239,000, and further proof of a strong labor market. This recent decline made the four-week average decrease slightly to 234,750.
- The Fed’s assets increased by $15.6 billion this week, bringing the total level to around $4.453 trillion. The weekly increase is centered in mortgage-backed securities which rose $13.1 billion.
- During the week, money supply (M2) decreased by $4.0 billion, a reversal of last week’s increase of $35.7 billion.
Keep track of economic indicators that might impact the muni market.
Treasury and Municipal Yields All Fall
- Treasury yields were mostly down, with the exception of the 2-year Treasury, which rose 5 bps to now yield 1.84%. The 10-year Treasury yield decreased by 3 bps and is now yielding 2.35%, while the 30-year Treasury yield fell 8 bps and now yields 2.69%. Municipal yields mostly saw gains this week except for the 2-year AAA-rated bond, which saw no change and continues to yield 1.47%. The 10-year AAA-rated bond yield increased 3 bps to2.02%, while the 30-year yield also saw a gain of 3 bps to yield 2.66%.
- Credit spreads remained increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond increasing 3 bps this week, and is now at 51 bps. However, the spread between the 30-year securities decreased by 11 bps this week and now stands at 3 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.
2-Year Yield Movement
10-Year Yield Movement
30-Year Yield Movement
|Maturity||Treasury Yield||Muni Yield||Spread (in BPS)|
Muni Bond Funds Back to Inflows
- After a large outflow of $935 million last week, muni bonds returned back to inflows with an increase of $70 Million in assets.
The Sales Tax Securitization Corporation Sales Tax Securitization Bonds, Series 2017 A, B, & C (IL)
The Illinois Sales Tax Securitization Corporation had over $743 million Sales Tax Securitization bonds issued this week in three different series. Series 2017A consists of over $172 million bonds, the Series 2017B consists of over $400 million and the Series 2017C consists of $171 million. Both Series 2017B and Series 2017C are taxable, while 2017A is tax-free. The bonds are rated AAA by Fitch, AAA by KBRA and AA by S&P. To browse credit reports of other muni bonds issued by the State of Illinois, click here.
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Rating Decision Updates on Muni Bonds
Moody’s Upgrades Mount Pleasant, IA’s GO to Aa3 From A1: The City of Mount Pleasant, Iowa, had $12 million of its general obligation unlimited tax (GOULT) bonds upgraded to Aa3 from A1. The city has had a growing tax base, which has led to healthy financial operations and strong reserves. To explore additional credit reports about other muni bonds issued by the State of Iowa, click here.
Moody’s Downgrades Doylestown Hospital (PA) to Baa3; Stable Outlook: The Doylestown Hospital Authority of Pennsylvania had $98 million of its outstanding debt downgraded to Baa3 from Baa2 this week. The hospital missed hitting its budget goals in 2017 due to a decline in operating performance. To explore additional credit reports about other muni bonds issued by the State of Pennsylvania, 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.