• Treasury yields were mostly down, while municipal yields saw little movement.
• Muni bond funds saw large outflows this week.
• Be sure to review our previous week’s report to track the changing market conditions.

• GDP figures were released this week and real GDP saw a quarter over quarter change of 2.5% to match the consensus. Real consumer spending was slightly higher than the consensus and saw a quarter over quarter change of 3.8% versus the 3.7% consensus.

• New Fed Chair Jerome Powell made his debut on Tuesday to the House Financial Services Committee this week. He mentioned that he believes the economy is stronger since December and that he is not worried about a recession anytime soon. Powell also mentioned that the Fed will do its best to avoid an overheated economy and balance out inflation to a 2% sustainable level.

• The International Trade in Goods figures came out, representing a trade deficit of $74.4 billion. The 2.2% fall in export numbers were led by a fall in capital goods and industrial supplies. Imports saw a 0.5% decline led by consumer goods.

• Jobless claims decreased by 10,000 this week to a total of 210,000, which is lower than the consensus amount of 230,000. This week’s measure is the lowest level in 49 years, earmarking that the labor market is near capacity. The four-week average also declined to 220,500.

• The Fed’s assets decreased by $18.3 billion this week, bringing the total asset base to around $4.393 trillion. This level is down $67 billion since the beginning of balance sheet unwinding in October 2017.

• During the week, money supply (M2) decreased by $5.1 billion, a continuation of last week’s $10.0 billion decrease.

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

• Treasury yields were mostly down this week, with the exception of the 2-year Treasury, which remained unchanged at 2.24%. The 10-year Treasury saw a decrease of 1 bps and now yields 2.86%, while the 30-year Treasury yield decreased by 2 bps and now yields 3.14%. Municipal yields saw little change this week, with the 2-year AAA-rated bond increasing 2 bps to yield 1.56%. The 10-year AAA-rated bond and 30-year AAA-rated bond yields remained unchanged and yield 2.48% and 3.08%, respectively.

• Credit spreads grew this week, with the largest spread between the 2-year Treasury and the AAA-rated municipal bond now standing at 68 bps. Meanwhile, the spread between the 30-year securities decreased to 6 bps from the previous week’s figure of 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 bond funds saw outflows of $592 million this week after $366 million of inflows the week before.

The largest issue of the week comes from Harris County in Texas, which issued $559 million of Toll Road Senior Lien Revenue and Refunding bonds, Series 2018A. The bonds are to help fund the Toll Road Project, which is meant to redesign the highway system that should help alleviate traffic congestion in the greater Houston area. The bonds are rated AA by Fitch and Aa2 by Moody’s.

Upgrade

Moody’s Upgrades Sedgwick County USD 266 (Maize), KS’s GOULT Bonds to Aa2: Moody’s upgraded the general unlimited tax bonds of Kansas’ Sedgwick County this week to Aa2 from Aa3. This affects over $109 million of bonds. This area, which encompasses a portion of Wichita, has a surplus reserve, strong liquidity levels and a growing tax base.

Downgrade

Moody’s Downgrades Oak Forest, IL’s GO to A1: The City of Oak Forest, Illinois, had $600,000 of its outstanding GOULT debt downgraded this week to A1 from Aa3. The city has seen a decline in its reserves due to underperforming tax increment finance (TIF) districts.

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