• Treasuries and muni yields were a mixed bag this week.

• Muni bond funds saw inflows for the fifth week in a row.

• Be sure to review our previous week’s report to track the changing economic situation.

• The Housing Market Index came in higher than expected at 68 versus the consensus amount of 65. This higher reading is due to builders seeing gains in both new home sales as well as six-month sales.

• Jobless claims decreased sharply by 12,000 to a total of 232,000 for the week. This was lower than the consensus number of 240,000 and the lowest reading since May 18. The reading for the four-week average marginally declined to settle at 240,500.

• The Federal Open Market Committee released the previous meeting’s minutes, which indicated that some members were interested in beginning the process of tapering the $4.5 trillion balance sheet in July. However, those few members were outnumbered by those wanting to have further debate on this issue during September.

• Dallas Fed Chairman Robert Kaplan spoke last week and mentioned that he would need further evidence that prices will rise to the 2% target in order for another rate hike to occur.

• Import prices came in as expected, with a month-over-month change of 0.1% and a 1.5% change on a year-over-year basis. The change in export prices was higher at 0.4% compared to the consensus 0.2% on a month-over-month basis. The gains were due to higher petroleum imports as well as agricultural exports.

• The Fed’s assets decreased by $6.2 billion this week, bringing the total level to around $4.463 trillion. The weekly decrease is centered in other assets, which fell $15.0 billion to offset a $9.0 billion increase in mortgage-backed securities.

• During the week, money supply (M2) increased by $7.3 billion, a reversal of last week’s decline of around $8.6 billion.

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

• Treasury yields were a mixed bag this week with the 2-year Treasury increasing 2 bps to yield 1.31%. The 10-year Treasury yield remained flat and is yielding 2.19%. The 30-year Treasury yield also declined 1 bps to 2.78%. Municipal yields also varied this week, with the 2-year AAA-rated bond yield dropping 1 bps to 0.88%. The 10-year AAA-rated bond yield increased 3 bps to 1.89%, while the 30-year yield increased 4 bps and is yielding 2.77%.

• Credit spreads were also mixed this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 4 bps to 60 bps. On the other hand, the spread between the 30-year securities decreased by 5 bps this week, and now stands at 1 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.

• Muni bond funds saw inflows for the fifth week in a row, with another large increase of $487 million in assets.

The largest issuance of the week was from the Washington D.C. Metropolitan Area Transit Authority, which issued over $496 million Series 2017B gross revenue transit bonds. The bonds are for continued funding of the area’s mass transit systems, like the metrorail and metrobus. The bonds are rated AA- by Fitch and S&P. To browse credit reports of other muni bonds issued by Washington D.C., click here.

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Upgrade

Moody’s Upgrades Ballard CSD, IA’s GO Rating to A1: The Ballard Community School District of Iowa had $3.1 million of its outstanding general obligation unlimited tax rating bonds upgraded to A1 from A2. The school has seen stable enrollment, moderate debt and pension liability and operating fund reserves that have grown over the last three years. To explore additional credit reports about other muni bonds issued by the State of Iowa, click here.

Downgrade

Moody’s downgrades East Jefferson General Hospital (LA) to B3; outlook negative: East Jefferson General Hospital of Louisiana had $152 million of its outstanding revenue bonds downgraded to B3 from Ba3. The downgrade is based on shrinking liquidity levels in a highly competitive market in New Orleans. The outlook remains negative with an expectation that there will be a covenant violation with the hospital falling below its required debt service by the end of its fiscal year. To explore additional credit reports about other muni bonds issued by the State of Louisiana, click here.

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