• Almost all bond yields dropped this week, with the exception of the 2-year Treasury.

• Muni bond funds snapped their seven-week positive trend and had outflows this week.

• Be sure to review our previous week’s report to track the changing economic situation.

• A weaker-than-expected employment situation was reported on Friday, although unemployment showed a modest decline. Nonfarm payrolls had a month-over-month change of 138,000, which is almost 50,000 below expectations. Private payrolls had a month-over-month change of 147,000, which is also lower than the consensus of 173,500. The unemployment rate came in at 4.3%, which was 0.1% lower than the previous measure and the current consensus measure.

• Consumer confidence remained strong at 117.9, slightly lower than the consensus of 119.0. Although at the bottom of the consensus range, the last two months had measures of 119.4 and 124.9, which were the two strongest months of the expansion.

• New jobless claims increased by 13,000, bringing the total to 248,000 for the week. This was considerably higher than the consensus amount of 239,000. However, this was due to the short holiday week, leading to estimates coming in from only nine states. Revisions are expected and the increased number of claims this week raised the four-week average to 238,000.

• The ADP Employment Report showed big gains in the private payroll sector, with an increase of 253,000 jobs. This was considerably higher than the consensus amount of 170,000 and well above the consensus range.

• The international trade deficit widened further in April to $47.6 billion, up $2.3 billion from March’s $45.3 billion. Exports fell 0.3% to $191 billion, while imports jumped 0.8% to $238 billion.

• Last week, the Fed’s balance sheet decreased by $10.9 billion in assets, bringing the total level to around $4.46 trillion. The weekly decrease is centered in mortgage-backed securities, which fell $9.4 billion.

• During the week, money supply (M2) increased by $37.7 billion, a continuation from last week’s $25.2 billion increase.

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

• Almost all Treasury yields fell this week, with the exception of the 2-year, which remained flat. The 10-year Treasury yield dropped 9 bps this week and is yielding 2.16%. The 30-year Treasury yield decreased by 10 bps to 2.81%. Municipal yields also demonstrated declines this week, with the 2-year AAA-rated bonds yield dropping by 3 bps to 0.88%. The 10-year AAA-rated bond yields dropped 9 bps, while the 30-year yield dropped by 11 bps to 2.71%.

• Credit spreads showed little movement, with the largest spread declining 1 bps between the 5-year Treasury and the AAA-rated municipal and now is 50 bps. With the decline in the 30-year muni bond yield, the spread between this instrument and its Treasury counterpart increased by 1 bps to reach 10 bps for the week.

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.

• After seven weeks of positive inflow, municipal bond funds reversed the upward trend and showed outflows of $116 million this week.

The Hudson Yards Infrastructure Corporation, a local development corporation organized by the City of New York, issued over $2.1 billion in revenue bonds this week. The Series A, which is the larger part of the issue is tax exempt, while the Series B, made up of $33 million, is taxable. The issue is rated A+ by Fitch, Aa3 by Moody’s and A+ by S&P. To browse credit reports of other muni bonds issued by the State of New York, click here.

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Moody’s Upgrades Adams County Fire Protection District, CO’s GO to Aa2: The Adams County Fire Protection District of Colorado had $2.7 million of its general obligation debt upgraded this week to Aa2 from Aa3. This is a reflection of the 2015 merger that doubled the tax base and helped improve the area’s financial operations. To explore additional credit reports about other muni bonds issued by the State of Colorado, click here.

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Moody’s Downgrades Illinois GOs to Baa3 From Baa2, Affecting $31.5B of GO and Related Debt; Outlook Negative: After a political impasse that has impeded progress on a growing pension deficit and several other backlogged debts, Moody’s downgraded over $31.5 billion of general obligation bonds from the State of Illinois. The downgrade is to Baa3 from Baa2 and the outlook for the state’s bonds remains negative. To explore additional credit reports about other muni bonds issued by the State of Illinois, click here.

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