Jessica Lerner

In 2024, variable rate (short put) issuance is up 6.4% increase year-over-year, LSEG data shows. Few expect issuance to return pre-financial crisis levels.

Demand for the increased supply has been "solid" if nearly largely reliant on income-oriented small lot buyers, noted Municipal Market Analytics, Inc. Partner Matt Fabian. Through last week, buyers continued to be separately managed account/retail in size.

Total volume currently stands at $224.13 billion, up 38.5% from $161.848 billion at this time last year. As the end of the first half approaches, several firms are revisiting their supply projections for the year, given the growth so far this year.

With the "pretty good run" month-to-date, it would not be unexpected to see "the market take a breather, and with a large calendar this coming week, it may again move sideways," said AllianceBernstein strategists in a weekly report.

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Municipal bond mutual funds saw small inflows as investors added $16.4 million to the funds after $154.4 million of inflows the week prior, according to LSEG Lipper.

The state's new law requires companies like investment banks to provide written verification of their positions, part of a trend among similar bills aimed at preventing Wall Street banks from lying about their positions, said a firearms industry lobbyist.

Issuance this year is "well on its way" to $450 billion, mostly from the tax-exempt supply of new money projects, said Matt Fabian, a partner at Municipal Market Analytics.

Despite some slight weakness Monday, munis continued an "impressive start to June," with yields falling 10 to 13 basis points last week, Birch Creek strategists said.

The new-issue calendar is led by the New York Transportation Development Corp. with $1.5 billion of green AMT special facilities revenue bonds for the John F. Kennedy International Airport New Terminal One project,

"Even after this week's rally, absolute yields look attractive in the context of the trading range over the past three years, May's underperformance versus taxable fixed-income, and our longer-term projections for lower rates this year," J.P. Morgan strategists said.

Household ownership of munis — which includes direct ownership of individual bonds in brokerage accounts, fee-based advisory accounts and SMAs — rose to $1.779 trillion, up 0.3% from Q4 2023 and from 5.6% in Q1 2023.

Driven by ongoing capital expenditure funding and current refunding opportunities, airport issuance is estimated at $21 billion in 2024, with a slew of from June through September and more planned in December, according to Ramirez.

"We will remain cautious until CPI and the FOMC are in the rear-view mirror and as long as these don't catalyze a sell-off (since that would trigger outflows) or catalyze a sharp rally (as municipals lag rates during a sharp rally and ratios can increase optically) ... " said Vikram Rai, head of municipal markets strategy at Wells Fargo.

Munis should see better performance this week as issuance falls to $5.2 billion this week and cash still needs to be reinvested, said Jason Wong, vice president of Municipals at AmeriVet Securities.

Municipal bond mutual funds saw inflows as investors added $549.2 million after $94.9 million of outflows the week prior, according to LSEG Lipper.

Issuance remains robust Wednesday with an estimated $5.9 billion, said J.P. Morgan strategists led by Peter DeGroot.

New-issue volume has topped $50 billion over the past few weeks, said AllianceBernstein in a weekly report.

Falling occupancy figures, staffing shortages, and rising labor costs have elevated the sector's risk, with Greenwich Investment Management's bankruptcy yet another example of how the sector requires thorough credit analysis.

This week's surge in issuance, which tops $14 billion, is "likely going to keep a lid on any enthusiasm," Birch Creek strategists said in a weekly report.