Lynne Funk

Amendments would make it "impossible" to enact the Plan of Adjustment because the cost would be too high.

Municipals outperformed the move in taxables Friday but weakness hangs over the market as fund flows lessen and supply increases. Taxable munis may be keeping exempt rates from moving higher.

For 31 consecutive weeks investors put cash into municipal bond mutual funds but saw just $36.87 million of inflows in the latest reporting period while high-yield funds saw $460 million of outflows after $103 million of outflows a week prior.

ICI reported $704 million of inflows, a $1.1 billion drop from the week prior, bringing the total to $76 billion year to date.

The increase in yields and spread widening across municipal sectors has given some pause to high-yield investors after months of stagnation.

Challenges abound in meeting the needs of both investors and issuers in incorporating environmental, social and governance factors into the municipal market. Jasper Cox, Fixed Income Analyst at the PRI, Principles for Responsible Investment, gives insights into how the market can adapt. Lynne Funk hosts. (23 minutes)

Municipals took a breather Monday, largely ignoring stock market volatility and softer U.S. Treasuries, ahead of a solid $9 billion new-issue week.

Ratios have moved into a higher, more favorable range, especially in the belly of the curve. The municipal calendar is building, led by taxables and refundings, after they dropped significantly in September.

The lower inflows and high-yield outflows can be tied to the correction over the past week and may point to uncertainty from retail investors over broader market volatility.

With a lot of cash still needing to be put to work, the Investment Company Institute showed another large week of inflows at $1.814 billion.

Municipals have not tracked directly with the UST moves, where the 10- and 30-year UST has risen 24 and 26 basis points, respectively, from Wednesday. Municipals have seen yields rise by 16 and 11 basis points.

Month-to-date returns for municipals are in the red with the Bloomberg Fixed Income Indices municipal index returning -0.12%, high-yield at -0.15% and taxables at -0.32%.

U.S. Treasuries sold off by double digits while municipals cut levels by one to three basis points. Refinitiv Lipper reported another $1.55 billion of inflows for the 29th consecutive week.

Municipals continue to stay in their own lane. ICI reported $1.4 billion of inflows in the 28th consecutive week.

Without the primary in play and a mostly muted secondary, triple-A yield curves were little changed, coming nowhere near the moves in UST with the 10- and 30-year falling five and six basis points as equities saw their worst day since May.

Municipals have been distracted by the robust primary market and that trend will continue next week when another large new-issue calendar greets investors.

Several strategists estimate the municipal market will be 50% taxable in five years if a direct-pay bond option makes its way into law.

Refinitiv Lipper reported $1.3 billion of inflows and an increase in high-yield flows, marking the 28th consecutive week the fund complex saw inflows.

While falling to the lowest amount of inflows since June 2, the total for the year according to ICI at $72 billion, is still on pace to come close to or break the record, $93.2 billion, hit in 2019.

Large new issues from California, New York utilities and airport deals were repriced to lower yields and remained the focus for the municipal market, again ignoring a swing by U.S. Treasuries.