• Treasury yields and municipal yields were all up for the week.

• Muni bond fund sees more than $1 billion of inflows.

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

• The Consumer Price Index came in at 0.1% on a month over month basis and matched consensus. It also matched consensus on a year over year basis at 2.1%. The index was led by housing and healthcare costs.

• Dallas Fed President Robert Kaplan said the Central Bank ought to increase interest rates at least three times in 2018. He also said that the unemployment rate in the U.S. is on its way to below 4%, which is an ‘overshoot’ of full employment and a potential danger sign for the economy.

• The Job Openings and Labor Turnover Survey (JOLTS) report for November came in lower than expected at 5.879 million versus the consensus amount of 6.038 million. Hires also fell, down 1.9 percent in the month to 5.488 million.

• Jobless claims increased by 11,000 this week to a total of 261,000 and higher than the consensus amount of 245,000. This recent increase made the four-week average increase slightly to 250,750. Although this report missed expectations, it is still a good indication that the job market is strong.

• The Fed’s assets increased by $2.3 billion this week. This brought the total asset base to around $4.446 trillion and is down $10.0 billion from the beginning of balance sheet unwinding in October 2017.

• During the week, money supply (M2) decreased by $5.3 billion, a continuation of last week’s decrease of $20.1 billion.

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

• Treasury yields were all up this week, with the 2-year Treasury rising 4 bps to now yield 2.00%. The 10-year Treasury yield increased by 8 bps and is now yielding 2.55%, while the 30-year Treasury yield gained 4 bps and yields 2.85%. Municipal yields all saw even bigger gains this week, with the 2-year AAA-rated bond gaining 2 bps to yield 1.59%. The 10-year AAA-rated bond yield increased 10 bps to 2.13%, while the 30-year yield also saw the week’s biggest gain of 14 bps to yield 2.79%.

• Credit spreads increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond increasing this week to now be at 60 bps. However, the spread between the 30-year securities also decreased to 6 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.

Municipal bond funds saw a large inflow of $1.04 billion this week, after having two weeks of outflows.

The largest issue of the week was from the New Jersey Economic Development Authority, which issued more than $375 million in lease revenue bonds this week. Series A are the State Lease Revenue Bonds (State Government Buildings – Health Department and Taxation Division Office Project), totalling over $196 million. Over $19 million are the Series B, which are federally taxable and are for the State Government Buildings – Health Department, Taxation Division Office and Juvenile Justice Commission Facilities Projects. Over $160 million were the Series C bonds that are for State Government Buildings, like the Juvenile Justice Commission Facilities Project. The bonds are rated A- by KBRA, Baa1 by Moody’s and BBB+ by S&P.

Upgrade

Moody’s Upgrades La Grange Park District, IL’s GO Rating to Aa1: The La Grange Park District of Illinois had its outstanding general obligation debt upgraded to Aa1 from Aa2. The area has a very healthy financial status, with low pension and debt burdens and an affluent tax base.

Downgrade

Moody’s Downgrades Great Neck Plaza Village, NY’s GO to Aa3: The Great Neck Plaza Village of New York was downgraded to Aa3 from Aa2 this week. The area has seen a serious decline in its tax base over the last few years and the overall economic status of the area has been falling.

We provide this report on a weekly basis. To stay up to date with muni bond market events, return to our News page.