Lynne Funk

New York Power Authority CFO Adam Barsky and Battery Park City Authority CFO Pamela Frederick join The Bond Buyer's Lynne Funk to unpack the far-reaching consequences of eliminating, reducing, or limiting the federal tax exemption for municipal bonds.

Belvia Gray, Public Finance Leader at Baker Tilly, talks about the firm's efforts and focus on bringing the industry together on cyber security threats, succession planning and more.

An investor-driven selloff followed the Los Angeles wildfires. ICE Data Services experts join to discuss the reaction, credit impact and growing role of climate risk data.

"'The market environment will likely become a bit more difficult in the coming week, as supply will jump to its highest level in weeks, while dealers are heavier than average," said Mikhail Foux, head of municipal research and strategy at Barclays.

Kim Olsan, senior fixed-income portfolio manager at NewSquare Capital, discusses the municipal market's performance, the impact of rising yields and inflation, and the evolving role of ETFs and separately managed accounts as the market braces for record supply in 2025.

Investors pulled more from municipal bond mutual funds in the final reporting week of 2024, but high-yield reverted to inflows to close out the year, adding to the sector's outperformance overall.

While municipals have outperformed USTs on the whole in 2024, they will close December with losses. How taxables perform in early 2025 coupled with macroeconomic and Washington policy uncertainty have municipal market participants on edge for what lies ahead.

While Friday's muni session was muted, the damage of a volatile UST market, paired with low new-issue supply and year-end positioning, has weighed on the asset class in December.

Municipals are seeing losses of 1.82% in December, which has dragged down overall gains to just 0.68% for 2024, per the Bloomberg Municipal Index.

Supply falls ahead of the final Federal Open Market Committee meeting of 2024 and the holidays but issuance still breaks records. The lighter calendar should provide support for the secondary market in the final weeks of the year.

Munis are in the black so far this month, with the Bloomberg Municipal Index at +0.33% in December and +2.88% year-to-date, the high-yield index is at +0.27% in December and returning 8.41% in 2024, while taxable munis are returning 0.43% so far this month and 4.58% in 2024.

Investors will be greeted with a diverse new-issue slate the week of Dec. 9, led by bellwether names. If all the deals price, 2024's total should break 2020's record by the end of the week. Despite rich valuations, demand has remained strong as the year winds down.

With an estimated $13 billion calendar on tap, demand for paper will be bolstered by the $16 billion of redemptions coming Monday while mutual fund inflows, this week at about $560 million and concentrated in the long-end, signal solid investor support. Munis are returning 1.73% in November as of Friday.

The Investment Company Institute reported $1.221 billion of inflows into municipal bond mutual funds for the week ending Nov. 20. Exchange-traded funds saw inflows of $836 million.

Supply has "declined materially, allowing dealers to take a breather, with their inventories dropping significantly, while retail investors do not seem to be spooked by rate volatility, lower taxes and possible threats to the tax-exempts, and continued putting money into tax-exempts at a brisk pace," said Mikhail Foux, managing director and head municipal research and strategy at Barclays.

Municipals are outperforming USTs to a large degree this month, with investment grade munis seeing positive 0.81% returns in November and 1.63% year-to-date. USTs are in the red at -0.40% in November with only 0.96% positive returns in 2024.

As headline risk swirls around the Fed and the transition to the Trump administration, municipals have largely stayed in their own lane. November finds the municipal market "in far better technical shape, with an attractive backdrop through at least year-end," J.P. Morgan's Peter DeGroot said. 

October's "price path has created wider spreads but also brought higher yields that are now in the range where a broader audience may begin to take notice," said NewSquare Capital Senior Fixed Income Portfolio Manager Kim Olsan, noting higher taxable equivalent yields for different tenors of the yield curve.

Oppenheimer's Head of Public Finance Beth Coolidge and Columbus Auditor Megan Kilgore delve into the future of public finance and human infrastructure on a wide range of topics, from affordable housing and workforce development to public health, climate resiliency, and digital access.