• Treasury yields all fell except for the 2-year Treasury, while all municipals yields gained.

• Muni bond fund flows showed inflows for the second week in a row.

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

• Consumer Price Index (CPI) came in at expected levels of 0.1% for the month-over-month change and 2.0% for the year-over-year change. The annual rate is moving in the right direction toward the Fed’s goal, thanks to traction in wireless services.

• The Fed Chair of San Francisco John Williams spoke on Thursday and said that the U.S. economy is growing strong enough for the Fed to gradually raise rates to 2.5% over the next couple of years. He also mentioned that it is reasonable that the Fed raises rates once in December and three more times in 2018.

• Import prices saw a month-over-month change of 0.2%, below the consensus measure of 0.4%. On a year-over-year basis, the change in import prices dropped 0.2% from the previous month and came in at 2.5%. Exports also came in lower than expected at 0.0% versus 0.1% on a month-over-month basis. On a year-over-year basis, export prices also fell by 0.1% to 2.7% from last month.

• Jobless claims increased by 10,000 this week to a total of 249,000, higher than the consensus amount of 236,000. It looks like the claims from Puerto Rico and Hurricanes Harvey and Irma are finished reporting and the current numbers are a more accurate representation of the nation’s labor force. This recent increase also caused the four-week average to grow from 231,250 to 237,750.

• The Fed’s assets decreased by $10.3 billion this week, bringing the total level to around $4.448 trillion. The weekly increase is centered on other assets which fell $12.3 billion and, together with a $3.3 billion decline in U.S. Treasury securities, helped offset a $5.2 billion rise in mortgage-backed securities.

• During the week, money supply (M2) increased by $11.9 billion, a reversal of last week’s decrease of $0.8 billion.

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

• Treasury yields all fell this week, with the exception of the 2-year Treasury, which increased by 7 bps to yield 1.72%. The 10-year Treasury yield fell 6 bps and is yielding 2.34%. The 30-year Treasury yield also fell this week by 10 bps and now yields 2.78%. On the other hand, municipal yields all saw gains, with the 2-year AAA-rated bond yield increasing by 6 bps to yield 1.23%. The 10-year AAA-rated bond yield increased 3 bps to 2.03%, while the 30-year yield saw an increase of 1 bps to yield 2.77%.

• Credit spreads increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond increasing by 2 bps to settle at 49 bps. However, the spread between the 30-year securities saw a big decline and now stands at 1 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 saw a second week in a row of inflows, increasing assets by $395 million.
   

The Triborough Bridge and Tunnel Authority had the biggest issue of the week, with over $720 million in general revenue bonds. There are two series of bonds, over $520 million of Series 2017 C-1 general revenue refunding bonds and $200 million of Series 2017 C-2 general revenue bonds. The bonds are purposed to refund certain funding obligations of MTA Bridges and Tunnels that is primarily responsible for the implementation and development of a single, mass integrated mass transportation system in the New York City area. The bonds are rated AA- by Fitch, Aa3 by Moody’s and AA- 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 Arizona Board of Regents’ series 2006 COPs to Aa3 and revises outlook to stable: The Arizona Board of Regents’ (ABOR), which acts on the benefit of both University of Arizona (UA) and Arizona State University (ASU), had $23.6 million of its outstanding certificates of participation bonds upgraded to Aa3 from A1 this week. Both universities have seen a substantial strengthening in their financial status, as ASU is responsible for 54% of the debt, while UA is responsible for 46%. To explore additional credit reports about other muni bonds issued by the State of Arizona, click here.

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Moody’s downgrades Kenyon College (OH) to A2; assigns A2 to series 2017 outlook stable: Kenyon College in Ohio had $193 million outstanding revenue bonds downgraded from A1 to A2 this week. In unison, the proposed $66 million of the Higher Educational Facility Revenue Bonds were also assigned an A2 rating with a stable outlook. The downgrade is a reflection of the school’s increase in financial leverage and and weakening reserve cushion. To explore additional credit reports about other muni bonds issued by the State of Ohio, click here.

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