Gary Siegel

The Investment Company Institute reported $385 million of inflows while ETFs fell to $124 million.

Spreads have been widening, but secondary trading was on the light side and triple-A benchmarks were cut by only a basis point in spots even as U.S. Treasury yields once again rose on the 10- and 30-year.

Triple-A benchmarks saw one basis point cuts in spots inside 10 years while the five-year U.S. Treasury hit a high of 1.154%.

Friday’s data suggested inflation remains a problem, as the voices calling for Federal Reserve action increase.

Municipals have mostly held steady as bid-wanteds have risen, but so have yields and ratios, making for a more satisfactory range for investors getting into the market at these new higher levels.

Another round of inflows was reported from the Investment Company Institute — the 31st consecutive week — but they came in at $308 million for the week ending Oct. 6, the lowest since outflows in March.

Volatility in the U.S. Treasury market continues to pull on municipal bond valuations, despite little trading volume.

Municipals outperformed the move in taxables Friday but weakness hangs over the market as fund flows lessen and supply increases. Taxable munis may be keeping exempt rates from moving higher.

For 31 consecutive weeks investors put cash into municipal bond mutual funds but saw just $36.87 million of inflows in the latest reporting period while high-yield funds saw $460 million of outflows after $103 million of outflows a week prior.

ICI reported $704 million of inflows, a $1.1 billion drop from the week prior, bringing the total to $76 billion year to date.

The increase in yields and spread widening across municipal sectors has given some pause to high-yield investors after months of stagnation.

Municipals took a breather Monday, largely ignoring stock market volatility and softer U.S. Treasuries, ahead of a solid $9 billion new-issue week.

Ratios have moved into a higher, more favorable range, especially in the belly of the curve. The municipal calendar is building, led by taxables and refundings, after they dropped significantly in September.

The lower inflows and high-yield outflows can be tied to the correction over the past week and may point to uncertainty from retail investors over broader market volatility.

The high-grade muni scales saw cuts of up to four basis points in a continued selloff Monday as the market faces a robust slate of new issues.

Month-to-date returns for municipals are in the red with the Bloomberg Fixed Income Indices municipal index returning -0.12%, high-yield at -0.15% and taxables at -0.32%.

U.S. Treasuries sold off by double digits while municipals cut levels by one to three basis points. Refinitiv Lipper reported another $1.55 billion of inflows for the 29th consecutive week.

Without the primary in play and a mostly muted secondary, triple-A yield curves were little changed, coming nowhere near the moves in UST with the 10- and 30-year falling five and six basis points as equities saw their worst day since May.

Large new issues from California, New York utilities and airport deals were repriced to lower yields and remained the focus for the municipal market, again ignoring a swing by U.S. Treasuries.

Market participants welcomed the municipal-related provisions in the reconciliation bill but are hesitant to start making bets on its passage.