• Treasury yields mostly drop while municipal yields mostly see increases this week.

• Muni bond funds see inflows for second week in a row.

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

• As expected, the Federal Open Market Committee met this week and raised the federal funds rate by 0.25% to the range of 1.75% to 2.00%. This marks the second rate hike for 2018 and consensus expects there to be at least one, if not two, more rate hikes before the year is over.

• The Consumer Price Index saw a month-over-month change of 0.2% and a year-over-year change of 2.8%, both matching consensus. Gasoline saw the largest increase of 1.7% while airfares saw the largest decrease of 1.9%.

• The Bloomberg Consumer Comfort Index saw an increase to 55.8, which suggests that consumers are feeling very confident in the strength of the economy.

• Jobless claims saw a decrease of 4,000 this week to a total of 218,000, which was lower than the consensus amount of 225,000. The four-week average decreased this week, bringing the total to 224,250, but it is still hovering around record-low levels.

• The Fed’s assets increased by $5.7 billion this week, bringing the total asset base to around $4.325 trillion.

• During the week, money supply (M2) increased by $13.8 billion, a continuation of last week’s $33.0 billion increase.

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

• Treasury yields mostly saw declines this week, with the exception of the 2-year Treasury that increased 4 bps to yield 2.54%. The 10-year Treasury had a decrease of 4 bps and now yields 2.91%. The 30-year Treasury yield decreased by 5 bps and now yields 3.04%. Municipal yields were mostly up this week with the exception of the 2-year AAA-rated bond, which fell 2 bps to yield 1.65%. The 10-year AAA-rated bond increased by 3 bps to yield 2.49%, while the 30-year AAA-rated bond also increased 1 bps to yield 3.04%.

• Credit spreads increased this week, with the largest spread between the 5-year Treasury and the AAA-rated municipal bond now standing at 79 bps. Meanwhile, the spread between the 30-year securities declined to 6 bps.

Be sure to check out our newly launched Municipal Bond Screener to explore muni bond CUSIPs across the U.S., based on custom parameters including the issuing state, insurance status and a range of different bond attributes such as maturity, coupon, price and yield.

• After seeing $74 million of inflows last week, muni bond funds saw another increase of assets under management of $277 million this week.

The largest issue of the week comes from the Massachusetts Educational Financing Authority, which issued over $306 million in Education Loan Revenue Bonds. There are three different issues: the Senior Series 2018A, which consists of $158 million in bonds that are federally taxable, Senior Series 2018B, which consists of $113 million that are subject to AMT, and Subordinate Series 2018C, which consists of $33 million that are also subject to AMT. The Series 2018A and 2018B bonds are rated AA by S&P Global Ratings and the Series 2018C are rated BBB by S&P.

Upgrade

Moody’s upgrades Burr Ridge Park District, IL to Aa1: The Burr Ridge Park District, Illinois had $3.4 million of its general obligation limited tax (GOLT) bonds upgraded to Aa1 from Aa2. The Chicago-based area has seen its wealth levels increase, thanks to a growing tax base and an increase in reserves.

Downgrade

Moody’s downgrades Brookfield, WI to Aa1; outlook stable: Moody’s downgraded the City of Brookfield, Wisconsin’s general obligation (GO) debt to Aa1 from Aaa this week. This downgrade has affected $76.5 million of total debt and, at the same time, Moody’s also assigned an Aa1 rating to the City’s $3 million Taxable Bond Anticipation Notes. The City has seen increasing risks in the financing of land that will be used for a new city-owned convention center.

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