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 increased across all maturities.
- Muni bond funds saw inflows for the second week in a row.
- Be sure to review our previous week’s report to track the changing economic situation.
Fed Keeps Rates Unchanged Over Inflation Concerns
- The Federal Open Market Committee met this week and, on Wednesday, announced there will be no changes to interest rates, which will remain at the target range between 1.00% and 1.25%. Like the last meeting, inflation remains to be the lingering issue.
- GDP was released on Friday and the real GDP showed a quarter-over-quarter change of 2.6% to match the consensus figures. The GDP price index showed a more than 1.0% quarter-over-quarter change, while the real consumer spending reported a quarter-over-quarter change of 2.8%. The real GDP and real consumer spending measures were exactly as expected, but inflation remains low at 1.0%.
- After last week’s 14,000 decline, jobless claims gained 10,000 to a total of 244,000 for the week. This was slightly higher than the consensus number of 240,000. The reading for the four-week average remained flat at 244,000.
- Consumer confidence blew away expectations and reported a level of 121.1, versus the consensus of 117.0. Although the peak figure was 124.9 in March of this year, this strong reading indicates that consumers believe the U.S. economy is very stable.
- International trade in goods continues to show a deficit, reporting at a negative $63.9 billion. This is better than the expected negative figure of $65.0 million, as imports showed a decline of 0.4% and exports showed a 1.4% gain.
- The Fed’s assets decreased by $11.6 billion this week, bringing the total level to around $4.465 trillion. The weekly decrease is centered in mortgage-backed securities, which fell $10.4 billion.
- During the week, money supply (M2) had a modest increase of $6.0 billion, a reversal from last week’s large increase of $84.1 billion.
Keep track of economic indicators that might impact the muni market.
Bond Yields Gain After Fed Decision
- Treasury yields increased this week after the Fed’s announcement to maintain current interest rate levels. The 2-year Treasury yield increased 1 bps to 1.35%. The 10-year Treasury yield also increased 5 bps this week and is now yielding 2.29%. The 30-year Treasury yield grew 9 bps to 2.90%. Municipal yields also increased this week, with the 2-year AAA-rated bond yield increasing 1 bps to 0.98%. The 10-year AAA-rated bond yield increased 3 bps to 1.90%, while the 30-year yield increased 5 bps and is now yielding 2.76%.
- Credit spreads increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 2 bps to settle at 57 bps. The spread between the 30-year securities increased by 4 bps this week and now stands at 14 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.
Credit Spread
| Maturity | Treasury Yield | Muni Yield | Spread (in BPS) |
|---|---|---|---|
2-year | 1.35% | 0.98% | 37 |
5-year | 1.83% | 1.26% | 57 |
10-year | 2.29% | 1.90% | 39 |
30-year | 2.90% | 2.76% | 14 |
Muni Bond Funds Show 2 Weeks of Inflows
- Muni bond funds saw inflows for the second week in a row, with an increase of $199 million in assets.
Pennsylvania Turnpike Commission Issues Subordinated Revenue Bonds
The largest issuance of the week was from the Pennsylvania Turnpike Commission Turnpike, which issued over $379 million Sub-series B-1 and over $371 million of Sub-Series B-2 subordinate revenue bonds. The bonds are commissioned by the Commonwealth of Pennsylvania to improve the current Pennsylvania Turnpike System, with the largest part being a 359-mile stretch from the eastern to the western parts of the state. The bonds are rated A- by Fitch and A3 by Moody’s. To browse credit reports of other muni bonds issued by the State of Pennsylvania, click here.
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Rating Decision Updates on Muni Bonds
Upgrade
Moody’s Upgrades FGUA (FL) Revenue Bonds (Golden Gate Utility System) to A1: The Florida Governmental Utility Authority Golden Gate Utility System’s had $35 million of its outstanding revenue bonds upgraded to A1 by Moody’s this week. The upgrade is a reflection of the system’s improved liquidity and strong rate management. To explore additional credit reports about other muni bonds issued by the State of Florida, click here.
Downgrade
Moody’s downgrades Hartford County Metro Dist., CT’s GOs to Aa3 with neg. outlook: The Hartford County Metropolitan District of Connecticut had over $568 million of its general obligation debt downgraded to Aa3 from Aa2. The downgrade reflects the deterioration of the area’s credit strength, due to severe liquidity challenges and escalating budget deficits. To explore additional credit reports about other muni bonds issued by the State of Connecticut, click here.
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