• Treasuries mostly gained, while muni yields were mostly down for the week.

• Muni bond funds returned to inflows after last week’s large outflows.

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

• The Employment Situation Summary was released on Friday and nonfarm payrolls were lower than expected, at 156,000 versus the consensus 180,000. Private payrolls also came in lower at 165,000 versus 180,000. The unemployment level increased 0.1% to 4.4%, higher than the consensus of 4.3%. These weaker-than-expected numbers disappointed as they could reflect a potential slowdown in a seemingly strong labour market.

• International trade in goods came in lower than the consensus amount, at negative $65.1 billion versus a $64.1 billion decline. Exports were reported at negative 1.3%, while imports fell 0.3%.

• Consumer confidence came in high at 122.9, higher than the consensus of 120.6. This measure is the highest since March 2017 and the second-highest rate since December 2000.

• Real GDP reported a quarter-over-quarter change of 3.0%, beating the consensus of 2.8%. The GDP price index saw a quarter-over-quarter change of 1.0% to match the consensus measure. These measures were strong, based on an increase in consumer spending and non-residential investment.

• Jobless claims saw a slight increase by 1,000 to a total of 236,000 for the week. This was lower than the consensus number of 237,000. The four-week average declined, settling at 236,750.

• The Fed’s assets decreased by $11.5 billion this week, bringing the total level to around $4.452 trillion. The weekly increase is centered in mortgage-backed securities, which fell $11.2 billion.

• During the week, money supply (M2) increased by $39.6 billion, a continuation of last week’s increase of around $11.5 billion.

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

• Treasury yields gained this week, with the exception of the 10-year Treasury. The 2-year Treasury increased by 1 bps to yield 1.34%. The 10-year Treasury yield remained unchanged and is yielding 2.17%. The 30-year Treasury yield increased 3 bps to 2.78%. On the other hand, municipal yields all dropped this week, apart from the 30-Year AAA-rated bonds. The 2-year AAA-rated bond yield dropped 2 bps to 0.85%. The 10-year AAA-rated bond yield also decreased 2 bps to 1.85%, while the 30-year yield remained flat and is yielding 2.75%.

• Credit spreads were also mixed this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal remaining unchanged from last week, at 61 bps. The spread between the 30-year securities increased by 3 bps this week.

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 returned to inflows of $243 million, after $763 million in outflows last week.

One of the largest issuances of the week was from the State of Maryland, which issued over $1.335 billion in general obligations bonds. The bonds are issued in two series: Second Series A, which consists of $550 million tax-exempt bonds, and Second Series B, which consists of over $785 million of tax-exempt refunding bonds. The Series A bonds are being used in state and local facilities to fund things like education and health facilities, while the Series B bonds are being used to purchase debt obligations. The bonds are rated Aaa by Moody’s and AAA by both S&P and Fitch. To browse credit reports of other muni bonds issued by Maryland, click here.

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Moody’s upgrades Redondo Beach Unified School District, CA’s GO Bonds to Aa2: Redondo Beach Unified School District had over $216 million of its general obligation bonds upgraded to Aa2 from Aa3. The upgrade reflects the area’s large residential tax base along with strong reserves and improving liquidity. To explore additional credit reports about other muni bonds issued by the State of California, click here.

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Moody’s Downgrades Riverside SD, PA’s GO and Assigns Baa1 to Series of 2017; Outlook Remains Negative: The Riverside School District of Pennsylvania had over $23 million of outstanding debt downgraded to Baa1 from A3 this week. The area has seen its financial condition deteriorate over the last few years, with decreased liquidity tied to a moderately growing tax base. To explore additional credit reports about other muni bonds issued by the State of Pennsylvania, click here.

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