• Treasuries and muni yields all jump this week.

• Muni bond funds return to inflows this week.

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

• Fed Chair Janet Yellen spoke on Tuesday and mentioned that with inflation softening, she is concerned that inflationary expectations have been slipping. Productivity growth has also been slow, measuring 1% compared to 2.5% previously. She also mentioned that the Fed’s rate hike plan has been well received by the markets and it has not caused any major corrections.

• Consumer confidence came in at a measure of 118.9, vastly surpassing the expectation of 116.7. With a strong labor market, low unemployment and the stock market hitting highs, the average consumer feels very strong about the economy.

• Revised GDP data came in slightly higher than the consensus figures. Real GDP was reported at 1.4% on a quarter over quarter change, higher than the consensus of 1.2%. Consumer spending figure was revised upward to 1.1% from a prior estimate of 0.6%. This had been the weakest consumer showing in seven years but is now the weakest in four years.

• Jobless claims increased slightly by 2,000, bringing the total to 244,000 for the week. This was slightly higher than the consensus number of 241,000. With the four-week average declining to 242,250, there are signs that the labor market is holding onto its strength.

• Last week, the Fed’s balance sheet decreased by $10.9 billion in assets, bringing the total level to around $4.463 trillion. The weekly decrease is based on mortgage-backed securities, which fell $10.8 billion.

• During the week, money supply (M2) decreased by $4.3 billion, a reversal from last week’s increase of $6.7 billion.

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

• Treasury yields all jumped this week, with the 2-year Treasury yield increasing 4 bps to 1.38%. The 10-year Treasury yield had the week’s largest increase, up 16 bps this week and is now yielding 2.30%. The 30-year Treasury yield increased by 11 bps to 2.83% to rebound off the recent lows. Municipal yields also increased this week, with the 2-year AAA-rated bonds yield increasing 9 bps at 0.99%. The 10-year AAA-rated bond yields increased 12 bps to 1.96%, while the 30-year yield increased 11 bps and is now yielding 2.81%.

• Credit spreads increased slightly, with the largest spread between the 5-year Treasury and the AAA-rated municipal increasing by 2 bps to settle at 54 bps. The spread between the 30-year securities remained unchanged to stand at 2 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 corrected from last week’s $947 million of outflows last week to see inflows of $413 million.

The Public Finance Authority of Wisconsin issued $500 million in limited obligation PILOT revenue bonds this week. The bonds are specifically issued to fund the American Dream at Meadowlands Project, which is a sports complex being constructed by Ameream, LLC and is located in Bergen County, NJ. The bonds are currently unrated by any major rating agency. To browse credit reports of other muni bonds issued by the State of Michigan, click here.

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Moody’s upgrades Arizona Power Authority’s Revenue Bonds to Aa1 from Aa2; outlook stable: The Arizona Power Authority had more than $38 million of its revenue bond debt upgraded to Aa1 from Aa2. The rating upgrade is due to the APA’s new take-or-pay power sales structure will be effective in October 2017, as well as contracts that were extended to 2067 and give the APA access to 35 new wholesale customers. To explore additional credit reports about other muni bonds issued by the Arizona Power Authority, click here.

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Moody’s downgrades Parchment School District, MI’s GO Bonds to A3; outlook negative: The Parchment School District of Michigan had $66.3 million of its general obligation downgraded from A2 to A3. Moody’s felt the downgrade to A3 was caused by the area’s limited tax base and increasing debt and pension burdens. To explore additional credit reports about other muni bonds issued by the State of Michigan, 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.