Lynne Funk

Primary deals are now coming at tighter spreads to the secondary than they have recently. Cooler heads are appearing on the institutional side, but ICI reports $1.7 billion pulled from muni market mutual funds.

A premarketing wire indicated the deal could price at spreads 300 basis points north of benchmark yields. In Monday's trade, the rally begun last week continued.

Taxable munis hold the distinction as being the largest positive sector year-to-date, up 2.81%. High-yield has been hammered, losing 10%.

A range of technical issues — from month-end accounting and financing to spread widening, price volatility and the coronavirus impact on businesses and the economy — spurred a tone of relative quiet in Thursday's trade.

The primary, meanwhile, digested a massive $1.12 billion bond offering from New York Power Authority. The entire deal was structured to mature later than 2045 and a good portion of it was designated green bonds.

The market isn't facing 50-basis-point swings, but its footing is still off as participants grapple with the long-term effects of the pandemic. New deals are getting pulled and New York Power is about to issue bonds maturing in 2060.

Rate volatility is still evident on the buy side of the municipal market as bid wanted lists reflect redemptions or portfolio restructuring by investors, analysts said.

The historic nature of how ratings for municipal issuers play out in times of severe volatility is under scrutiny from various market participants.

The secondary market took a backseat to the primary Thursday with yields holding steady while Lipper reported $833 million of inflows, the first since February 26.

ICI reported nearly $3 billion of outflows, which is foretelling that coronavirus-driven volatility still lingers even if the muni market has rallied by at least 60 basis points since early-April high yields.

Technical and fundamental concerns surrounding credit and supply could present challenges for the market going forward but participants tepidly welcomed signs of stability.

Confidence in the municipal market among participants has been boosted by the Fed purchase program, but some expect that if equities dive amid more coronavirus fears or re-test March lows, munis could be rattled once again.

By trading electronically — the international standard — and providing regulatory reporting support as a result, the firm said it broadens the ability for foreign investors to buy munis.

The Fed will help the muni market navigate the short-term pain caused by coronavirus via direct purchases of bonds on the short end. However, the Fed will effectively hand off the responsibility to choose winners and losers to state officials, a move the market generally greeted positively.

The market appears to be moving toward some semblance of normal conditions as the new-issue pricings and moderating bid volume create a more stable tone.

Tax-exempt and taxable deals priced as dealers opened up their balance sheets to new issues while the market still awaits word from the Fed on coronavirus-led purchase programs.

With Fed purchases on short end, more deals are showing up on the calendar and this week may become the testing ground for reopening the primary as participants gauge volatility and rates.

There will be more queasiness ahead of any calm in municipals as adjustments to the coronavirus-induced climate continue to test the market’s resolve.

Forced selling continues and credit spreads are widening as much as 200 basis points in spots making for a large bid-ask disconnect in the market.

Coronavirus-led fears are leading investors, particularly retail, to cash once again amid uncertainty surrounding how much and what maturities of municipal bonds the Fed will purchase once its program begins.