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.
- Municipal yields saw declines in all of the maturities while Treasuries show little movement.
- Muni bond funds see outflows after two weeks of consecutive inflows.
- Credit spreads between Treasuries and AAA-rated municipal bonds widened.
- Be sure to review our previous week’s report to track the changing economic situation.
Positive Employment Reports While China and U.S. Presidents Meet
- Chinese President Xi and U.S. President Trump met this week to talk about trade policy between the two world powers. President Trump has claimed that China is a ‘grand champion’ of currency manipulation and that U.S. exports have suffered from the devaluation of the yuan.
- International trade data was released on Tuesday, showing a decline of $43.6 billion. This was better than the consensus of a $44.5 billion decline. This was a result of a 1.8% drop in imports and only a 0.2% gain in exports. The trade deficit has centered around strong demand for foreign consumer goods and foreign autos.
- ADP Employment Report data came in at 263,000 for March, below the levels of both January and February. However, this was considerably higher than estimates of 170,000 and surpassed even the high end of the consensus range of 200,000.
- Jobless claims data showed a large decline of 25,000 jobs this week, bringing the total claims to 234,000. This surpassed the consensus estimate of 250,000 and brings down the four-week average to 250,000. This measure solidifies the idea that the labor market is very strong and that jobless claims continue to be at record lows.
- Last week, the Fed’s balance sheet increased by $5.0 billion in assets, bringing the total level to around $4.47 trillion. The weekly increase is due to central bank liquidity swaps that rose $4.1 billion.
- During the week, money supply (M2) increased by $12.3 billion, a larger increase from last week’s moderate $2.6 billion increase.
Keep track of economic indicators that may impact the muni market.
Treasuries Stay Stable While Municipal Yields Decline
- Treasury yields showed little movement overall except in the shorter-term maturities. The two-year Treasury yield increased by 4 bps to 1.29%. The 10-year Treasury saw a modest decline of 1 bps to 2.38%. The 30-year Treasury remained flat for the third week in a row and continues to yield 3.01%. Municipal yields declined across all maturities, with the two-year AAA-rated bonds decreasing 2 bps to 1.01%. The 10-year AAA-rated municipal decreased by 7 bps while the 30-year decreased by 9 bps.
- Credit spreads widened, with the largest spread still remaining between the five-year Treasury and the AAA-rated municipal at 40 bps. The spread between the 30-year AAA-rated municipal and the 30-year Treasury showed big movement this week, with Treasuries now providing a 3 bps higher yield than the municipal equivalent. With muni yields continuing to fall and the stock market showing signs of volatility, investors are heading for safety with Treasuries.
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 | 1.29% | 1.01% | 28 |
5-year | 1.92% | 1.52% | 40 |
10-year | 2.38% | 2.19% | 19 |
30-year | 3.01% | 2.98% | 3 |
Muni Bond Funds See Outflows After Two Successful Weeks of Inflows
- After seeing inflows for two weeks in a row, municipal bond funds showed outflows of $368 million. With municipal yields all dropping this week, investors are likely to seek other investments that provide a greater yield.
Washington Health Care Facilities Authority Revenue Bonds, Series 2017A
Washington Health Care Facilities Authority issued over $114 million in revenue bonds that are rated AA by Fitch and Aa2 by Moody’s. The bonds are used for the Seattle Children’s Hospital, a non-profit organization that is partnered with the Department of Pediatrics of the University of Washington School of Medicine. To browse credit reports of other muni bonds issued by the State of Washington, click here.
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Rating Decision Updates on Muni Bonds
Upgrade
Moody’s Upgrades Town of Wappinger, NY’s GOLT Rating to Aa2: $17.5 million of the Town of Wappinger, NY’s general obligation limited tax bonds were upgraded to Aa2 from Aa3. The town has shown an improving financial position, plenty of liquidity and a sizeable tax base. To explore additional credit reports about other muni bonds issued by the State of New York, click here.
Downgrade
Moody’s Downgrades Morrill County (Bridgeport), NE’s GO Bonds to A2: Morrill County School District 63 (Bridgeport Public Schools), Nebraska had $8.5 million of its general obligation bonds downgraded to A2 from A1. The school district has shown a deteriorating financial position and a decrease in operating reserves. To explore additional credit reports about other muni bonds issued by the State of Nebraska, 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.
