Jessica Lerner

The FOMC held rates steady at the conclusion of its meeting Wednesday and offered no hints regarding a September move.

The muni market has "cheapened and steepened," which is a great opportunity for people still on the sidelines to get into the market again, said Jennifer Johnston, director of municipal bonds research at Franklin Templeton.

The asset class got a "much-needed boost" from inflows into muni mutual funds last week, said Birch Creek strategists.

Issuance for the week of July 28 is estimated at $11.035 billion, with $9.018 billion of negotiated deals and $2.017 billion of competitive deals on tap, according to LSEG.

Investors added $571.5 million from municipal bond mutual funds in the week ended Wednesday, following $224.6 million of outflows the prior week, according to LSEG Lipper data.

The fund's sell-off in June shows the challenges of accurate pricing in the high-yield muni market.

Year-to-date volume stands at $310.166 billion, up 17.4% from $264.151 billion at the same time last year, prompting several firms to revisit their supply projections for the year.

Longer-term munis have become more attractive, said Cooper Howard, a fixed income strategist at Charles Schwab.

There is a buyer base that is a little bit "skeptical" of longer maturities, but it's more of a retail response, said Adam Congdon, a director at Payden & Rygel.

The primary market saw "decent subscriptions" last week, but the entire primary calendar came at "healthy concessions to where evals had been marked on existing bonds," Birch Creek strategists said.

Munis are "under pressure as elevated primary supply collides with lackluster seasonal reinvestment flows, leaving dealers heavy and buyers selective," said James Pruskowski, an investor and market strategist.

As the market continues to contend with the surge in issuance, investors still have a significant amount of cash that can be put to work, said Jeremy Holtz, a portfolio manager at Income Research + Management.

As always, economists had disparate interpretations of the consumer price index, with none expecting a July rate cut. And tariff questions remain unanswered.

Prices for some bonds issued for Florida's express train have fallen sharply since Friday.

"The muni market seemed to ignore Treasuries [last] week, marching to its own beat," said Birch Creek strategists.

The market has seen some "weirdness" in the muni curve, said Craig Brandon, co-head of muni investments at Morgan Stanley Investment Management.

"Municipal outperformance against taxable sectors has moved short-term ratios on or through their 252-day moving averages, while intermediate and long maturities are holding at or above average ranges," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

"Market volatility is likely to pick up, but the latest development does not constitute an escalation in the trade war," according to UBS strategists.

Markets are "tilting to a risk-off posture as participants brace for the chance of Trump tariff-sparked turbulence in the coming hours and days," said José Torres, senior economist at Interactive Brokers.

UST yields rose across the curve in response to the employment report with the two-year rising nearly 10 basis points while municipals largely ignored the moves and ratios fell as a result.