The markets started to bounce back this week, posting weekly gains as of the close on Thursday, before falling again on Friday. There was bad news for investors on the macro front, as Nonfarm Payrolls were up 74,000 for December, coming in far below analysts' expectations of 197,000. The large gap between actual added jobs and the analyst expectation may be be due to weather-related issues in December. The Bureau of Labor Statistics reported that there were 273,000 not working in December due to the weather.
The unemployment rate fell to 6.7% from 7%, with employment higher in retail and wholesale trade, but lower in the information sector. Though this was below what analysts expected, the labor force participation rate was reported at 62.8%, which is the lowest it's been since January 1978. This means that though the unemployment rate fell, it was probably due to discouraged workers rather than because of an improving labor market. Also on the employment front, Initial Jobless Claims for last week came in at 330,000, which was less than the 335,000 expected. 10-Year Treasury rates were down slightly this week from last week's highs, ending Thursday at 2.97 after peaking last Friday at 3.01. Below, we look at two of Moody's municipal bond downgrades, as there were no municipal bond upgrades this past week.
Downgrades
- Yeshiva University, NY: Moody's downgraded this university's rating to B1 from Baa2, and has kept the university on review for further downgrade. The magnitude of the downgrade to B1 reflects the depth of operating and cash flow deficits concurrent with extremely thin unrestricted liquidity and lack of a clear strategy to regain financial equilibrium. Minimal headroom, if any, expected under covenants exacerbates risks of limited liquidity and heavy reliance on external bank lines. Extraordinary reliance on the endowment to fund operations and cover debt service, likely to continue for the near-term, will erode or, at best, prohibit growth of financial reserves in line with peers.
- Poughkeepsie, NY: Moody's downgraded this city to Baa3 from Baa2. The downgrade to Baa3 reflects ongoing deterioration in the city's financial position, expected to remain negative in the near term, constrained liquidity and ongoing tax base declines. The rating also reflects the city's below average wealth levels and above average debt burden. The negative outlook reflects continued pressure facing the city's financial position after consecutive years of operating deficits, despite a small projected surplus in fiscal 2013. All of the affected debt is secured by the city's unlimited ad valorem property tax pledge.
