• Fed Vice Chairman Fischer continues to indicate a possible rate hike during the December meeting.

• The Dow Jones hits record 19,000 level during Thanksgiving week as longer-term Treasury prices fell and yields rose. Municipal yields are now surpassing Treasuries in both the 10- and 30-year maturities.

• Jobless claims increase as expected from last week’s 43-year low.

• On Monday, Fed Vice Chairman Stanley Fischer spoke primarily about the long-term outlook of the economy and how fiscal policy can do more to help, furthering the idea that the Fed will raise interest rates in the upcoming weeks. Find out more about what happens to muni bonds when interest rates rise and how to make the best use of muni bond funds in the current economic scenario to further your research.

• The Fed’s balance sheet showed a weekly increase of $12.1 billion, indicating the Fed is adding liquidity to the market by buying Treasuries. This action was mostly likely caused by the recent lows that Treasury bonds have seen, and by the Fed buying these securities in an effort to reduce interest rate fluctuations. As a result, money supply showed a weekly increase of $51.1 billion. With interest rates expected to rise next month, the Fed is doing everything in its power to ensure rates and inflation remain stable.

• Existing home sales for October jumped to 5.6 million, above the consensus amount of 5.42 million. This now shows a 2.0% month-over-month change and a 5.9% year-over-year change in growth of existing home sales. The 5.6 million amount is the highest the figure has been for the year, as consumers find the real estate market is growing stronger.

• New home sales for October came in at 563,000 and sales are up 17.8% for the year. The supply of new homes on the market increased by 2.9% to 246,000, which is the strongest since September 2009. This rising trend, compared with growing existing home sales, shows that consumers are buying real estate, in part due to mortgage requirements becoming looser and the expectation that mortgage rates will go higher.

• Jobless claims increased by 18,000 to 251,000, and are slightly above the consensus figure of 250,000. This comes as no surprise, as last week the 235,000 figure was the lowest jobless claims figure in 43 years. Even with the correction, the trend continues to move downward as more Americans find jobs in a strengthening labor market.

• The Bloomberg Consumer Comfort Index declined to 44.8, after rising to new highs for the year at 45.4 last week. The weekly decline was the first since the week of October 20, but the index still shows consumer confidence is strong and is near its highs for the year. This positive trend reflects a good labor market and positive signs for future consumer spending.

• Deficit in international trade in goods came in at -$62.0 billion in September from -$56.5 billion in August. Exports were down by 2.7% for the month, while imports increased by 1.1%. This can be partially contributed to the potential changes to current trade agreements that President Trump expects to do.

• Barring 30-year bonds, credit spreads between Treasuries and municipal bonds narrowed this week as municipal yields rose, while Treasuries yields came down. Shorter-term maturities narrowed, with the 2-year now only 1 bps apart and the 5-year narrowing 14 bps from a previous 27 bps difference. Longer-term maturity spreads widened, as 30-year municipals increased 17 bps to 3.16% over the Treasury yield of 2.99%. Make sure to compare with last week’s report to measure the changes more precisely.

• For bond investors, the bonds with longer maturities are more sensitive to fluctuations in interest rates. Therefore, with the market expecting interest rates to rise next month, longer-term bonds are now reflecting the price movement ahead of time.

• On November 22nd, the Commonwealth of Massachusetts Transportation fund issued $200 million Aa1 / AAA rated revenue bonds (2016 Series B) for the purpose of the Rail Enhancement & Accelerated Bridge Programs. There are currently five different maturities issued, with the majority ($140 million) maturing in 2046. To view Moody’s rating reports for other Commonwealth of Massachusetts bonds, click here.

Upgrade

Moody’s Upgrades to Aa3 South Fayette Township School District’s GO Bonds: The South Fayette Township School District in Pennsylvania had $83.5 million of outstanding debt upgraded to Aa3 from A1. This is due to the school district’s growing tax base with higher wealth levels, strong reserve levels and high debt burden. To explore other Moody’s reports for Pennsylvania muni bonds, click here.

Downgrade

Moody’s Downgrades to A3 from A2 Sandoval Co., NM’s Infrastructure GRT bonds: The downgrade of the Sandoval County’s $2 million in outstanding infrastructure gross receipts tax (GRT) bonds reflects very negative revenue trends over the past six years. There has been declining revenues and narrowing coverage that is currently mitigated by a legally-required debt service reserve and an additional $700,000 held in a bond fund available for debt service. To explore other Moody’s reports for muni bonds issued by Sandoval County, NM, click here.

Using our Moody’s Reports section, find out what other muni bonds were upgraded or downgraded during the week.

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

• Municipal bond fund flows were negative at -$2.2 billion for the second week in a row, after last week’s large -$3.0 billion decline. This recent trend continues the downward trend after a yearlong consecutive uptrend. Investors are likely to fear that interest rates will negatively impact municipal bond funds, especially those with a higher duration, which are more sensitive. Read How to Measure Muni Bond Interest Rate Sensitivity? to learn more about how your bond or fund might be affected by interest rates.