Jessica Lerner

With one full week of June left and the end of the second quarter approaching, the week was "a sort of Groundhog Day for municipal yields," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

The FOMC's decision to "hold rates steady while signaling only two cuts this year was a subtle but powerful shift," said James Pruskowski, CIO at 16Rock Asset Management.

The rock-bottom prices show the risks of a high-yield market where liquidity is famously limited.

"We expect no change to rates but [for the Federal Open Market Committee] to continue to signal that rate cuts should still be expected," said Cooper Howard, a fixed income strategist at Charles Schwab.

In the first quarter of this year, 18.6% of new-issue volume in the market was traded electronically, up from 17.3% last year, according to data from Coalition Greenwich.

After two weeks of a deluge of issuance, supply drops off "given the FOMC meeting and Juneteenth holiday, so we expect investors will refocus on the secondary market and look to scoop up any value left behind in the wake of the issuance onslaught," said Birch Creek strategists.

Issuance takes a bit of a breather due to the Juneteenth holiday and the Federal Open Market Committee meeting, Barclays strategists said.

BlackRock strategists are "constructive" on munis for multiple reasons and think the current market environment presents itself as a buying opportunity, especially as issuance continues to be elevated and provides "ample ability" to source bonds in the primary market.

A "lighter-than-anticipated CPI report" led to UST firmness, as it "quelled fears about tariff-related inflation and boosted enthusiasm that the Fed will cut rates in the next two or three meetings," said José Torres, senior economist at Interactive Brokers.

The elevated new-issue market comes on the heels of one of the largest weeks of issuance.

"The broader themes from the demand perspective are that it's choppy and people are not necessarily jumping into high-yield munis with both feet," said First Eagle's John Miller.

However, the new-issue calendar may not be "absorbed as easily, given valuations have grown less compelling after this week's performance," said Birch Creek strategists.

The nonfarm payrolls report shows the economy is "hanging in there," though it is slowing, said Jeff MacDonald of Fiduciary Trust International.

This week the market has performed "exceedingly well" with the tailwind of June 1 reinvestment capital, said J.P. Morgan strategists led by Peter DeGroot.

There is still a lot of chaos and uncertainty out there, said Jennifer Johnston, director of municipal bond research at Franklin Templeton.

"We're going to get a lot of price discovery with the big deals, a large number of deals, and then a lot of cash to put to work," said Whitney Fitts of Appleton Partners.

Issuance this week soars to nearly $17 billion, and investors are "bracing for another hefty serving the following week," said Birch Creek strategists.

Primary bond market volume was up 3.6% year-over-year to $49.9 billion, according to LSEG data.

With higher yields and ratios, many participants say investors should be taking advantage of current levels.

Supply has weighed on munis to some extent over the past few weeks, as week after week issuance tops $10 billion, said Jeremy Holtz, a portfolio manager at Income Research + Management.