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.
- Treasury yields all gained, while municipal yields saw declines, with the exception of the two-year.
- Muni bond fund flows returned to inflows again.
- Be sure to review our previous week’s report to track the changing market conditions.
Consumer Sentiment Remains High Thanks to Employment Figures
- The Job Openings and Labor Turnover Survey (JOLTS) reported slightly higher than expected at 6.093 million jobs versus the consensus of 6.082 million. Hires and separations showed little change with 5.3 million and 5.2 million, respectively.
- November Consumer sentiment reports reported at a level of 97.8, lower than October’s 100.7 measure. November’s reading was lower than the consensus amount of 100.0 but is still a very high measure and the second highest since January.
- The New York Fed President William Dudley announced that he plans to retire mid-2018, before his term officially ends in January 2019. He has been the New York Fed Chair since 2009 and has served the Fed since 2007.
- Jobless claims increased by 10,000 this week to a total of 239,000, higher than the consensus amount of 232,000. However, the four-week average fell to 231,150 from 232,500.
- The Fed’s assets increased by $2.7 billion this week, bringing the total level to around $4.459 trillion. The weekly increase is centered on a $2.6 billion rise in other assets, which include accrued interest and other accounts receivable.
- During the week money supply (M2) decreased by $0.8 billion, a reversal of last week’s increase of $4.9 billion.
Keep track of economic indicators that might impact the muni market.
Treasury Yields Gain, While Municipals Yields Mostly Fall
- Treasury yields all gained this week, with the two-year Treasury increasing by 4 bps to yield 1.65%. The 10-year Treasury yield gained 7 bps and is yielding 2.40%. The 30-year Treasury yield also increased this week by 7 bps and now yields 2.88%. On the other hand, municipal yields fell with the exception of the two-year AAA-rated bond yield, which increased by 5 bps to yield 1.17%. The 10-year AAA-rated bond yield decreased 2 bps to 2.00%, while the 30-year yield saw a decline of 8 bps to yield 2.76%.
- Credit spreads shrank this week, with the largest spread between the five-year Treasury and the AAA-rated municipal bond decreasing by 5 bps to settle at 47 bps. However, the spread between the 30-year securities saw a big gain and now stands at 12 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 | 1.65% | 1.17% | 48 |
5-year | 1.99% | 1.52% | 47 |
10-year | 2.05% | 2.00% | 5 |
30-year | 2.88% | 2.76% | 12 |
Muni Bond Funds Back to Inflows
- After last week’s $506 million of outflows, muni bonds returned back to inflows of $427 million.
The Tennessee Energy Acquisition Corporation Gas Project Issues Revenue Bonds
The Tennessee Energy Acquisition Corporation (TEAC) had the biggest issue of the week, with over $678 million Gas Project revenue Series 2017A bonds. The gas project consists of the acquisition of a fixed quantity of natural gas to be delivered over a thirty-year term between J. Aron & Company and the TEAC. The bonds are rated A by Fitch. To browse credit reports of other muni bonds issued by Tennessee, click here.
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Rating Decision Updates on Muni Bonds
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Moody’s Upgrades Passaic County, NJ’s GO Debt to Aa2 from Aa3; Outlook is Stable: Passaic County in New Jersey had its outstanding general obligation debt upgraded from Aa3 to Aa2. The county has a large and growing tax base, with significant reserves and a manageable pension liability. To explore additional credit reports about other muni bonds issued by the State of New Jersey, click here.
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Moody’s downgrades Premier Health Partners, and Miami Valley Hospital, OH to A3; outlook to negative: The Premier Health Partners (PHP) and Miami Valley Hospital of Ohio were both downgraded to A3 from A2, affecting $647 million of outstanding debt. Premier Health Partners lost a major contract with United Health as well as facing reductions in Medicaid payments. This downgrade of the PHP coincides with the rating of the area’s Miami Valley Hospital, which also has a negative outlook moving forward. To explore additional credit reports about other muni bonds issued by the State of Ohio, 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.
