• Treasury yields and municipal yields all gained, with the exception of the 30-year AAA-rated bonds.

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

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

• GDP was announced last week as real GDP matched the consensus amount of 3.3% for a quarter-over-quarter change. The GDP price index saw a quarter-over-quarter change of 2.1%, slightly lower than the expected 2.2%. Nonresidential investment and inventory growth added a little more in the second estimate, while residential investment and net exports subtracted a little less.

• Current Fed Chair Janet Yellen spoke Wednesday on Capitol Hill and addressed Congress about its current tax situation. In what is most likely her final address, she said that the labor force growth has been unusually sluggish. She then made the suggestion that Congress should encourage business investment, capital formation, improve infrastructure, better education and support innovation.

• The Senate passed the Republican tax bill early Saturday morning in a close 51 to 49 vote. The bill permanently lowers the corporate tax rate from 35% to 20%. Tax rates will also be cut for individuals, though their tax cuts will expire after a decade. The Senate bill keeps the same number of individual tax brackets, with slight alterations.

• Jobless claims decreased by 2,000 this week to a total of 238,000, slightly lower than the consensus amount of 240,000. This excellent measure continues to show that the U.S. labor market is still very strong. However, this recent decline still made the four-week average increase slightly to 242,250.

• The Fed’s assets decreased by $12 billion this week, bringing the total level to around $4.439 trillion. The weekly decrease is centered in mortgage-backed securities, which fell $11.6 billion.

• During the week, money supply (M2) decreased by $3.9 billion, a reversal of last week’s increase of $20.5 billion.

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

• Treasury yields were all up this week, with the 2-year Treasury increasing 5 bps to yield 1.80%. The 10-year Treasury yield remained increased by 6 bps and is yielding 2.40%. The 30-year Treasury yield gained 4 bps and now yields 2.80%. On the other hand, municipal yields all saw gains with the exception of the 30-year AAA-rated bonds. The 2-year AAA-rated bond yield had this week’s largest gain, increasing by 18 bps to yield 1.50%. The 10-year AAA-rated bond yield increased 4 bps to 2.15%, while the 30-year yield saw a decrease of 8 bps to yield 2.76%.

• Credit spreads remained unchanged this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond continuing to remain at 42 bps. However, the spread between the 30-year securities declined and now stands at 4 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 fourth week in a row of inflows, increasing assets by $39 million.
   

The Board of Education for the City of Chicago, Illinois, had this week’s largest issuance with $745 million in Series C through G. The two largest issues are the Series 2017C with over $351 million and the Series 2017H bonds, which had $280 million issued. The bonds are rated BB- by Fitch, BBB by KBRA and B by S&P. To browse credit reports of other muni bonds issued by the State of Illinois, click here.

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Moody’s Upgrades Bentley University (MA) to A2 and Assigns A2 to Series 2017; Outlook Stable: Bentley University of Massachusetts had $19.5 million of Series 2017 revenue bonds upgraded to A2 from A3 this week. The bonds were upgraded due to the outsize of growth in total assets over the past five years, as well as the University’s increased financial surplus and flexible reserves. To explore additional credit reports about other muni bonds issued by the State of Massachusetts, click here.

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Moody’s Downgrades Decatur, IL’s, GO rating to A2 & Assigns A2 to GO bonds; Outlook Negative: The City of Decatur in Illinois had $6.1 million of its general obligation refunding bonds Series 2017 downgraded to A2 from A1 this week. The city has a moderately sized tax base but has suffered from limited reserves and high long-term liabilities. To explore additional credit reports about other muni bonds issued by the State of Illinois, 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 here.