• Treasury yields were a mixed bag, while all municipals yields gained for the second week in a row.

• Muni bond fund flows showed inflows for the third week in a row.

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

• With the United States celebrating Thanksgiving on Thursday, both the U.S. equity and bond markets were closed.

• Leading indicators came in higher than anticipated at a 1.2% month-over-month gain versus the estimate of 0.6%. This was considerably higher than September’s measure of 0.1%, now that the effects of the hurricanes are no longer around.

• Current Fed Chair Janet Yellen officially submitted her resignation this week, as she will step down once the new successor, Jerome Powell, is officially sworn in on February 3, 2018. Yellen has been Fed chair since February 3, 2014, and has been a member of the Federal Reserve of Governors since 1994.

• Jobless claims decreased by 13,000 this week to a total of 239,000, slightly lower than the consensus amount of 240,000. The recent measure shows claims from Puerto Rico are lower than expected and levels are back to a low position. However, this recent decline still made the four-week average increase slightly to 239,750.

• The Fed’s assets increased by $2.3 billion this week, bringing the total level to around $4.451 trillion. The weekly increase is centered on mortgage-backed securities, which rose $2.8 billion as well as other assets that rose $1.8 billion. These offset a $2.4 billion decline in federal agency debt securities.

• During the week, money supply (M2) increased by $20.3 billion, a continuation of last week’s increase of $11.9 billion.

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

• Treasury yields were a mixed bag this week, with the 2-year Treasury increasing 3 bps to yield 1.75%. The 10-year Treasury yield remained unchanged and is still yielding 2.34%. The 30-year Treasury yield fell by 2 bps and now yields 2.76%. On the other hand, municipal yields all saw gains for the second week in a row, with the 2-year AAA-rated bond yield increasing by 9 bps to yield 1.32%. The 10-year AAA-rated bond yield increased 8 bps to 2.11%, while the 30-year yield saw an increase of 7 bps to yield 2.84%.

• Credit spreads decreased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond decreasing by 7 bps to settle at 42 bps. However, the spread between the 30-year securities saw a big gain 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 bonds saw a third week in a row of inflows, increasing assets by $576 million.
   

Broward County, located in South Florida, issued over $287 million of its Florida Airport System revenue bonds this week. The bonds are labeled as Series 2017 and are not exempt from the alternative minimum tax (AMT). The bonds are designed to help fund the capital improvement program of the FLLAir Plan, which is currently estimated at a total of $3.2 billion. The FLLAir Plan stands for the FLL Airport Improvements and Renovations Program, which is a comprehensive plan that was developed to address both airfield and terminal capacity issues. The bonds are rated A1 by Moody’s and A+ by S&P. To browse credit reports of other muni bonds issued by the state of Florida, click here.

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Moody’s Upgrades Babylon, NY to Aaa; Assigns Aaa to $25.2 GOLT bonds. Outlook Stable: The town of Babylon in New York had $7.4 million of its Public Improvement Refunding Serial Bonds 2017 Series A, and $17.8 million Various Purpose Serial Bonds 2017 Series B upgraded to Aaa by Moody’s this week. Moody’s also upgraded the town’s $166 million of outstanding GO debt to Aaa due to a large tax base and sizeable reserves. To explore additional credit reports about other muni bonds issued by the State of New York, click here.

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Moody’s Downgrades Geneva Area City School District, OH’s GO to A3; Assigns Negative Outlook: The Geneva Area City School District of Ohio had $15.3 million of its general obligation unlimited tax (GOULT) bonds downgraded to A3 from A1. The downgrade is due to the school district’s declining reserves, which have been pressured by an operating deficit this year. To explore additional credit reports about other muni bonds issued by the State of Ohio, click here.

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