• Bond yields saw declines in all of the maturities between Treasuries and municipals.
• Muni bond funds saw a large increase of over $1 billion this week.
• Credit spreads between Treasuries and AAA-rated municipal bonds shrunk this week.
• Be sure to review our previous week’s report to track the changing economic situation.

• Fed Chairwoman Janet Yellen spoke last Monday and announced that the Fed looks to maintain the healthy status of the U.S. economy. The goal of the Fed is to maintain 2% inflation and continue to allow the economy to “coast along” until it warrants an adjustment with a rate hike.

• Consumer Price Index (CPI) showed a month-over-month decrease of 0.3%, but a year-over-year change of 2.4% increase. Both measures did not meet consensus data, where the month-over-month was 0.0% and the year-over-year measure was 2.6%.

• The Bloomberg Consumer Comfort Index reported a measure of 51.0, up 0.08% from March’s measure of 50.2. This strong measure is an indication that consumers feel confident about the economy, which is supported by the strong labor market.

• Last week, the Fed’s balance sheet increased by $9.9 billion in assets, bringing the total level to around $4.48 trillion. The weekly increase is because of an increase in mortgage-backed securities, which rose $12.0 billion and were offset by a $5.0 billion fall in central bank liquidity swaps.

• During the week, money supply (M2) decreased by $38.5 billion, a correction from last week’s $12.3 billion increase. This was the lowest decline since February 18, 2016, which fell $73.1 billion.

• The Job Openings and Labor Turnover Survey (JOLTS) report showed 5.74 million in job openings, up 2.1% from February’s report. This is the highest measure since July of last year and the fourth highest of the expansion. On a year-over-year increase, the openings are up over 3.2%.

• Jobless claims data showed a modest decline of 1,000 jobs this week, bringing the total claim amount to 234,000. This was considerably lower than the consensus estimate of 243,000 and brings down the four-week average to 247,250.

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

• Treasury yields showed a big decline across all maturities. The two-year Treasury yield decreased by 8 bps to 1.21%. The 10-year Treasury saw a modest decline of 14 bps to 2.24%, while the 30-year Treasury fell by 12 bps, yielding 2.89%. Municipal yields also declined across all maturities, with the two-year AAA-rated bonds decreasing by 3 bps to 0.98%. The 10-year AAA-rated municipal decreased by 8 bps, while the 30-year decreased by 6 bps.

• Credit spreads narrowed this week, with the largest spread between the five-year Treasury and the AAA-rated municipal falling to 32 bps from 40 bps seen last week. The spread between the 30-year AAA-rated municipal and the 30-year Treasury had a 6 bps move in the opposite direction from the week prior. Municipals are again yielding 3 bps higher than the Treasury equivalent.

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 last week’s outflows, muni bond funds see a very large influx of funds, showing an inflow of around $1.51 billion. With the Fed raising rates in early March and the bond market stabilizing, investors seem to be taking interest in muni bonds again.

The City of San Jose, California Airport issued over $473 million in Series 2017A revenue bonds that are subject to the Alternative Minimum Tax (AMT). The purpose of the bonds is to refund a portion of certain outstanding City of San Jose Airport revenue bonds, as well as to make a deposit to the general account of the Bond Reserve fund. The bonds are rated A- by Fitch, A2 by Moody’s and A- by S&P. To browse credit reports of other muni bonds issued by the City of San Jose, California, click here.

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Upgrade

Moody’s Upgrades Union City, GA’s GO Bonds to Aa3: Over $5 million of the Union City, GA General Obligation bonds were upgraded to Aa3 this week. This was because of the city’s improving financial position as well as manageable tax burden. To explore additional credit reports about other muni bonds issued by the State of Georgia, click here.

Downgrade

Moody’s Downgrades Cook County. H.S.D. 205 (Thornton Township), IL’s GO to A1: Cook County High School District 205 had over $28 million of their General Obligation Limited Tax School Bonds downgraded from Aa3 to A1. The area has shown a weak economic profile with steadily declining reserves over the last five years. To explore additional credit reports about other muni bonds issued by the Cook County of Illinois, click here.

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