• Treasury and municipal yields both saw gains across the board.

• Muni bond funds saw its second week of inflows.

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

• New home sales were significantly higher than expected at 667,000 for September, a surge of 18.9% from the previous month. This was also at the peak of the consensus range and 100,00 higher than the estimate amount of 555,000. This is the largest increase in the last 28 years and the highest level observed since October 2007.

• President Trump announced this week that he is very close to selecting the next Fed chair. On Wednesday, he narrowed his search to four candidates, after eliminating White House Economic Adviser Gary Cohn from the running.

• GDP figures came in on Friday were better than expected at a quarter-over-quarter change of 3.0% versus estimates of 2.5%. However, this is most likely due to an increase in inventories caused by a backup in supply chain from the hurricanes.

• The international trade in goods saw an increase in the deficit to $64.1 billion, slightly higher than estimates of $63.9 billion. Imports saw an increase of 0.9%, led by capital goods and food products. Exports rose by 0.7%, but strength was isolated to industrial supplies, with capital goods, consumer goods and vehicles all down.

• Jobless claims increased by 10,000 this week to a total of 233,000, slightly lower than the consensus amount of 235,000. The readings are starting to reflect the claims from Puerto Rico but are initially lower than expected. The four-week average is 239,500 and is now getting back to normalized levels prior to the storm season.

• The Fed’s assets decreased by $8.6 billion this week, bringing the total level to around $4.461 trillion. The weekly decline is centered on mortgage-backed securities, which fell $7.4 billion.

• During the week, money supply (M2) decreased by $20.8 billion, a reversal from two weeks of straight increases.

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

• Treasury yields all had modest gains this week, with the 2-year Treasury increasing by 1 bps to yield 1.59%. The 10-year Treasury yield grew by 2 bps and is yielding 2.41%. The 30-year Treasury yield increased 3 bps and now yields 2.92%. Municipal yields all showed gains this week, with the 2-year AAA-rated bond yield increasing by 5 bps to yield 1.09%. The 10-year AAA-rated bond yield increased 7 bps to 2.04%, while the 30-year yield saw this week’s largest gain and was up by 9 bps to yield 2.90%.

• Credit spreads shrank this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond decreasing by 6 bps to settle at 58 bps. The spread between the 30-year securities also shrank and now stands at 2 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 continued to show inflows this week, with a $111 million increase.

The New York City Transitional Finance Authority issued $990 million in tax-secured subordinate bonds this week. There are two series in the issuance, $850 million in Subseries B-1 Tax-Exempt Bonds and $140 million in a Subseries B-2 Taxable Bonds. The bonds are to be used to finance general city capital expenditures. The bonds are rated Aa1 by Moody’s and AAA by S&P. To browse credit reports of other muni bonds issued by New York, click here.

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Moody’s upgrades City of Inglewood CA’s POBs to A3 from Baa1: The City of Inglewood in California had its taxable pension obligation bonds upgraded to A3 from Baa1. The rating increase stems from the city’s solid fiscal position with healthy reserves and the coverage provided by the property tax override monies that would help offset any fault to the general fund. To explore additional credit reports about other muni bonds issued by the State of California, click here.

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Moody’s Downgrades to A2, Port Arthur, TX’s GOLT Debt: Moody’s downgraded over $55 million general obligation limited tax bonds by the City of Port Arthur, TX to A2 from A1. The downgrade is a reflection of the deteriorating financial position of the city mixed with the unexpected financial obligations that were brought on by hurricane damage. To view credit reports of more bonds issued in Texas, click here.

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