Jessica Lerner

Refinitiv Lipper reported $798.474 million was pulled from municipal bond mutual funds in the week ending Wednesday after $407.976 million of inflows into the funds the previous week.

California and the Port Authority of New York and New Jersey held one-day retail order periods for $1 billion-plus issues.

Investors remain hesitant about "jumping back into munis even as rates are nearing multi-year highs as tax-exempts are still not cheap enough with the front-end ratios still yielding under 70% while the historical averages are around 90%," AmeriVet Securities' Jason Wong noted.

The calendar will rebound with an estimated $7.141 billion next week with $6.323 billion of negotiated deals on tap and $817.6 million on the competitive calendar.

Refinitiv Lipper reported $407.976 million of inflows from municipal bond mutual funds for the week ending Wednesday after $534.428 million of outflows into the funds the previous week.

Despite this, August saw the largest monthly volume of 2023, helped by several billion-dollar deals and multiple Texas school district deals.

"We've seen more buyer attention at this time of the year versus what we generally would experience as we approach the beginning of September," said Morgan Stanley's Matthew Gastall.

Over the last month or so there's been some volatility in the muni market driven by the Treasury side, said Daryl Clements, municipal portfolio manager at AllianceBernstein.

The muni market "finally succumbed to the month-long rate selloff that had seen valuations test historically rich levels," said Birch Creek Capital strategists in a weekly report.

The new-issue calendar for the final week of August is estimated at a meager $2.979 billion. Bond Buyer 30-day visible supply sits at $5.76 billion.

Refinitiv Lipper reported $534.428 million of outflows from municipal bond mutual funds for the week ending Wednesday after $264.046 million of outflows into the funds the previous week.

In other asset classes, there has been more transparency, activity and efficiency due to electronic trading. The muni market has been behind in realizing how beneficial electronic trading can be, sources said.

Supply scarcity is helping the market through the Treasury volatility. Bond Buyer 30-day visible supply currently sits at $4.72 billion.

This week's new-issue supply needs to be "priced to sell to pique investor interest," said noted Nuveen's Daniel Close and Anders S. Persson.

Continued pressure on the UST market coupled with the end of the summer reinvest may begin to test new issues as investors are able to be more selective.

Total volume in the first half of the year was $180.882 billion in 3,853 deals, down 17.1% from the $218.230 billion in 5,444 over the same period in 2022, according to Refinitiv data.

In comparison to the $17.689 billion of transactions completed in the first half of 2022, the top two municipal bond insurers wrapped $15.571 billion in 2023.

"Bearish Treasury moves have kept some pressure on the muni market and prevented an attempt to rally during the summer season when large redemptions trump issuance," BofA Global Research said in a report.

Refinitiv Lipper reported $264.046 million of outflows from municipal bond mutual funds for the week ending Wednesday after $278.559 million of inflows the previous week.

Municipal CUSIP request volume decreased in July on a year-over-year basis, following an increase in June, according to CUSIP Global Services.