Finance

After the week's losses, August could kick off with a "buyer's market" for munis, Peter DeGroot wrote for J.P. Morgan.

With longer-term municipal bond yields falling, there's less of an incentive to issue tender option bonds, analysts said, but a market remains. 

Wednesday's FOMC meeting helped sparked a selloff in U.S. Treasuries. On Thursday, it was the muni market's turn to react, MMA's Kevin McGuigan said.

The muni market is enjoying more favorable tax-exempt yields, NewSquare Capital's Kim Olsan said; they may be helping the market ignore the fallout from the FOMC meeting.

The muni market is going through a period of "consolidation, not to be confused with deterioration," according to Hennion & Walsh's James Pruskowski.

Beneficial rainfall allowed the Texas city to move its timeline for a projected water supply emergency to September 2028 from the same month in 2027.

The strong day for munis and USTs is likely due to the United States pausing its military strikes on Iran, said Ajay Thomas, head of public finance at FHN Financial.

Pennsylvania fuel consumption has been gradually declining, Fitch analysts wrote, straining the security for the turnpike's oil franchise tax revenue bonds.

Issuance is an estimated $7.558 billion for the week of July 27, with $6.709 billion of negotiated deals on tap and $849.4 million of competitives, according to LSEG.

Muni yields were cut eight to 13 basis points, depending on the curve, while UST yields rose two to six basis points, pushing the two-, three-, five-, seven- and 10-year USTs to yearly highs.

Cook County, Illinois, will return to market next week with $119.5 million of Series 2026 fixed rate, tax-exempt sales tax revenue bonds.

The muni market's losses were likely driven by USTs, said Chad Farrington of DWS — but they could show the beginnings of weakening demand.

Tariff threats, international conflicts and inflation concerns are working "in tandem on the municipal side to slow down some of the aggressive interest that was there in the beginning of summer," Sage Advisory's Jeff Timlin said.

Geopolitical uncertainty will keep being a challenge for risk assets, according to James Pruskowski, managing director at Hennion & Walsh. But the muni market will still benefit from strong supply and demand.

Issuance is an estimated $10.567 billion this week, with $8.948 billion of negotiated deals on tap and $1.62 billion of competitives, according to LSEG.

The deal funds the municipalization of a private water utility that had been controlled by investor-owned utility Eversource.

USTs ended the week looking strong after a positive CPI report, MMA's Kevin McGuigan said, while munis finally seem to have corrected from their "extremely rich" ratios.

Munis finally corrected Thursday after UST yields prompted investors to reevaluate the "overstretched" asset class, NewSquare Capital's Kim Olsan said.

The focus on Wednesday has been on the primary market, particularly the six-part $2.4 billion deal from the New York State Thruway Authority, which came a little wider than where the issuer had been trading in the secondary market.

The Aquarion deal is joined this week by two other sizable deals: the New York State Thruway Authority's $2.444 billion state personal income tax revenue bonds, and the New Jersey Turnpike Authority's $1.06 billion turnpike revenue bonds in two deals.