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 decreased across almost all maturities.
- Muni bond funds saw inflows for the fourth week in a row.
- Be sure to review our previous week’s report to track the changing economic situation.
Weak CPI Data Holds Off Rate Hikes
- The JOLTS report came in higher than expected and showed there were 6.163 million job openings in the month of June. This was higher than the consensus amount of 5.6 million and previous figure of 5.702 million.
- Jobless claims increased 3,000 to a total of 244,000 for the week. This was higher than the consensus number of 241,000. The reading for the four-week average marginally declined to settle at 241,000.
- Dallas Fed President Robert Kaplan spoke this week and believes the Fed’s key interest rate is getting closer to being neutral and that they should wait for further evidence for inflation to rise before making any more changes to monetary policy.
- The Consumer Price Index was lower than expected at 0.1% on a month-over-month change versus the 0.2% consensus. The year-over-year change was also lower than expected at 1.7% versus the consensus of 1.8%. These lower-than-expected figures were due to a moderation in housing costs as well as a decline in wireless services costs.
- Minneapolis Fed President Neel Kashkari spoke on Friday about the weaker-than-expected CPI data and believes that the Fed should continue to hold off on any more rate hikes.
- The Fed’s assets increased by $2.2 billion this week, bringing the total level to around $4.469 trillion. The weekly increase is centered around other assets that rose $2.6 billion.
- During the week, money supply (M2) declined by $8.6 billion, a reversal of last week’s gain of around $12.1 billion.
Keep track of economic indicators that may impact the muni market.
Bond Yields Continue to See Declines
- Treasury yields all decreased this week with the 2-year Treasury dropping 6 bps to yield 1.29%. The 10-year Treasury yield decreased 7 bps this week and is now yielding 2.19%. The 30-year Treasury yield also declined 5 bps to 2.79%. Municipal yields all decreased this week, with the exception of the 30-year bonds. The 2-year AAA-rated bond yield decreased 7 bps to 0.89%. The 10-year AAA-rated bond yield decreased 1 bps to 1.86%, while the 30-year yield remained unchanged and is yielding 2.73%.
- Credit spreads shrank this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal decreasing by 2 bps, and now sits at 56 bps. The spread between the 30-year securities decreased by 5 bps this week, and now stands at 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.
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Muni Bond Funds See Large Inflows
- Muni bond funds saw inflows for the fourth week in a row, with a large increase of $471 million in assets.
The City of New York Issues General Obligation Bonds
The largest issuance of the week was from the City of New York, which issued over $898 million 2018 Series A general obligation bonds. The bonds are for various purposes and range from 2018 through 2028 in maturity. 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 the State of New York, click here.
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Rating Decision Updates on Muni Bonds
Moody’s Upgrades Medina, MN’s GO Bonds to Aa1: The City of Medina in Minnesota had $1.2 million of its Series 2017A debt and $13.8 million of its outstanding general obligation unlimited tax debt upgraded to Aa1 from Aa2. The city has shown financial growth thanks to a steady tax base and manageable debt burdens. To explore additional credit reports about other muni bonds issued by the State of Minnesota, click here.
Moody’s downgrades West Virginia State University to B1; Rating Under Review for Downgrade: West Virginia State University had $10.7 million of its revenue bonds downgraded to B1 from Baa2. The downgrade is based on a negative 2017 financial performance and expected weak performance in 2018. This is due to a decline in core enrollment as well as revenue pressures from expected reductions in state operating support. To explore additional credit reports about other muni bonds issued by the State of West Virginia, click here.
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