• Treasury yields saw big gains, while municipal yields mostly fell.

• Muni bond funds returned to inflows this week.

• Be sure to review our previous week’s report to track the changing market conditions.

• Import and export figures came in higher than consensus. Imports showed a month-over-month change of 0.7%, while exports reported 0.8%. These numbers are slightly skewed due to oil prices, where petroleum saw an increase of 4.5% in September. On a year-over-year basis, imports reported a 2.7% increase, while exports reported an increase of 2.9%.

• Housing Market Index showed optimism with home builders, reporting at 68 versus the consensus amount of 64. This was primarily due to strong readings from future sales and current sales. However, traffic remains lower than expected, primarily due to low interest from first-time homebuyers.

• Jobless claims fell by 22,000 this week, far below the consensus amount of 240,000 to report at 222,000. The readings are now back to pre-hurricane levels, but the reports from Puerto Rico are most likely not yet reflected in the total levels yet.

• President Donald Trump met with Fed Chair Janet Yellen this Thursday as her term is coming to an end next February. Yellen was appointment by President Barack Obama and is competing against Fed Governor Jerome Powell, Stanford Economist John Taylor, former Fed Governor Kevin Warsh and top White House Economic Advisor Gary Cohn.

• The Fed’s assets increased by $10.3 billion this week, bringing the total level to around $4.470 trillion. The weekly increase is centered around mortgage-backed securities that rose $9.8 billion.

• During the week, money supply (M2) increased by $27.6 billion, a continuation from last week’s increase of $12.2 billion.

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

• Treasury yields all had large gains this week, with the 2-year Treasury increasing by 7 bps to yield 1.58%. The 10-year Treasury yield saw this week’s biggest gain, up 10 bps, and is yielding 2.39%. The 30-year Treasury yield also increased 7 bps and now yields 2.89%. Municipal yields mostly declined this week, with the exception of the 2-year AAA-rated bond yield that increased by 1 bps to yield 1.04%. The 10-year AAA-rated bond yield decreased 1 bps to 1.97%, while the 30-year yield dropped this week by 2 bps and is yielding 2.81%.

• Credit spreads saw a large movement this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond increasing by 9 bps to settle at 64 bps. The spread between the 30-year securities also grew and now stands at 8 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 reversed the last two weeks of outflows with inflows this week, totaling $351 million this week.

The Industrial Development Authority of Maricopa County in Arizona had the largest issuance of the week, with over $188 million in revenue bonds. The bonds were issued to construct, renovate, improve and furnish the Banner Health University Medical Center towers. Banner Health is a nonprofit entity that owns 27 acute hospitals across six states. The bonds are rated AA- by Fitch and AA- by S&P. To browse credit reports of other muni bonds issued by Arizona, click here.

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Upgrade

Moody’s Upgrades Strongsville C.S.D., OH’s GO to Aa2: The Strongsville City School District of Ohio had $8.6 million of its general obligation unlimited and limited tax bonds upgraded from Aa3 to Aa2 this week. This rating upgrade also applies to the $78.5 million of post-sale general obligation bonds as well. This city has a, affluent tax base and, over the years, has put itself in a strong financial position with high liquidity levels. To explore additional credit reports about other muni bonds issued by the State of Ohio, click here.

Downgrade

Moody’s Downgrades Shepherd University to Baa1; outlook negative: Moody’s downgraded $22 million of Shepherd University’s outstanding debt to Baa1 from A3. The school is located in West Virginia and the downgrade was caused by a decline in student enrollment and poor operating performance. To view more West Virginia bonds, 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.