Jessica Lerner

The face amount of munis outstanding rose to $4.171 trillion, a 0.8% increase from Q2 2024 and 2.9% from Q3 2023, according to the latest Fed data.

Muni mutual funds saw outflows after 23 weeks of inflows as LSEG Lipper reported investors pulled $316.2 million for the week ending Dec. 11. High-yield municipal bond funds, though, saw inflows of $192.3 million.

Most on the Street expect issuance to come in around $500 billion, but a few think volume will be much higher, primarily because of potential changes to the tax exemption. Most firms expect refunding volumes to also grow in 2025.

Municipal investors are more focused on the final new-issues coming down the pike and repositioning books as 2024 heads to a close. ICI reported another week of inflows into municipal bond mutual funds.

"With strong demand, rate cuts and favorable technicals, the muni market — outside of an unexpected shock — is set up to perform well over the next couple of months," said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

High-yield municipal bond funds saw inflows of $534.1 million compared to $300.6 million compared the previous week, per LSEG Lipper data.

"This matter is now under active investigation by federal authorities and impacted financial institutions, who are coordinating with the White Lake Township Police Department," said Daniel Keller, chief of police, in a statement.

Technicals could "break down" if there is a potential decline in risk assets or rising unemployment, particularly in white-collar jobs, said Jeff Timlin, a managing partner at Sage Advisory.

Muni investors hope "any move toward higher yields is steady, even dignified, such that it doesn't catalyze an outflow cycle that would countervail year-to-date total returns just before we close out the year," said Vikram Rai, head of municipal strategy at Wells Fargo.

Munis ended November in the black with the asset class seeing gains of 1.73% for the month, pushing year-to-date returns to 2.55%.

November's total is below the 10-year average of $32.278 billion and is the lowest monthly total this year. The year's total is about $25 billion short of $500 billion.

"Earlier this month, Chair [Jerome] Powell noted that there was no 'hurry' to cut rates," noted BMO Senior Economist Priscilla Thiagamoorthy. The minutes, she noted, "confirm a broad support for taking a more cautious approach in easing monetary policy."

Markets could see that "the risks of higher inflation and interest rates are implicit constraints on the Trump policy agenda, with the eventual policy outcomes potentially less inflationary than some investors previously feared," UBS strategists noted.

"It became apparent that building this new critical care, advanced care bed tower was a strategic imperative," said John Morgan, interim CFO at WMCHealth.

High-yield funds saw $608.9 million of inflows compared with inflows of $150.3 million the week prior.

"Volatility creates all kinds of opportunities in the municipal space, not just for tax-loss harvesting, but for positioning and parts of the yield curve that might be undervalued or certain sectors or states that are poised to perform well going into yearend," said Tim McGregor, a managing partner at Riverbend Capital Advisors.

JoAnne Carter, managing director and president of PFM, will succeed Hartman as CEO.

"This year, with the tax-exemption clearly threatened, primary calendars should (although, of course, might not) be larger, putting a $500 billion full-year supply total in range, with $451 billion already in the books through 46 weeks," said MMA's Matt Fabian.

Houston is set to price Tuesday $1 billion of United Airlines Terminal Improvement Projects AMT revenue bonds while the Public Finance Authority will bring $125 million of non-rated Million Air Three General Aviation Facilities Project revenue bonds.

This month is experiencing similar volatility as 2016 when generic yields traded higher by 50 to 70 basis points during November of that year, said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.