Finance

LSEG Lipper reported Thursday that investors added $147 million to muni mutual funds for the week ending Wednesday after outflows of $514.5 million the week prior. High-yield saw some outflows, though.

The $68 billion deficit reported for California's budget is an eye-opening figure but the revenue trends are less dramatic when viewed over multiple years.

A hotel tax that supports the authority's bonds has recovered strongly from the pandemic, the rating agency said.

The Investment Company Institute reported more outflows from municipal bond mutual funds for the week ending Dec. 13, with investors pulling $588 million from the funds.

The Bloomberg Municipal Index has returned 1.90% so far in December and 5.96% year-to-date, while the High-Yield Index is up 2.75% this month and 8.94% in 2023. Taxable munis are returning 3.98% in December bringing year-to-date returns to 7.83%.

The rebound in the cruise industry, which has now more than recovered all the ground it lost during the pandemic, lifted the Canaveral Port Authority's rating.

The Philadelphia-based financial advisory firm has used BVAL for several years, but once the full interpolated curve and the intraday hourly changes were released on the EMMA, PFM decided to use BVAL as its primary pricing curve.

With fears of further Fed hikes subsided, Birch Creek strategists said with "loads of cash still sitting on the sidelines, and expectations that cash will no longer earn 5%+, we believe the muni market will benefit in 2024 from a return of investors looking to allocate to the asset class."

Triple-A yields fell up to five basis points Friday while USTs were mixed. Munis still underperformed taxables on the week, but the setup for the asset class going into yearend is decidedly positive.

The muni market finances the "fabric of our nation, and now, because of Citi's exit, the cost of financing for state and local governments is going to go up," a sell-side source said.

Secondary trading showed clear strength across the yield curve Thursday with bellwether names trading up significantly from recent prints and original pricing levels. New-issues in the primary benefited with issuers repricing to lower yields and tight to triple-A curves.

Muni yields fell up to five basis points and dramatically underperformed USTs, as they are wont to do on FOMC days. Treasury yields fell as much as 29 basis points on the two-year and sent the 10-year down closer to the 4% threshold.

Issuers should "absolutely be issuing if possible; the end of year outlook is positive on the surface but substantial volatility lies just below and could arrest or interrupt what have been easier primary market conditions," said MMA's Matt Fabian.

The weakness came as the new-issue calendar grew to $5.9 billion with the addition of a $900 million refunding deal from the Illinois State Highway Toll Highway Authority slated for Thursday. Bond Buyer 30-day visible supply sits at $6.95 billion.

Nuveen's marquee fund has seen the worst performance among the largest high-yield funds so far this year.

The new-issue calendar comes in just over $3 billion, of which is $847 million of state personal income tax revenue bonds from the Empire State Development in three competitive sales.

"Higher education is going to be facing continued challenges in the near term," said Tom Kozlik, managing director at Hilltop Securities.

LSEG Lipper reported Thursday that investors pulled $144.5 million from muni mutual funds for the week ending Wednesday after outflows of $58.9 million the week prior.

Municipal mutual fund losses continued last week as the Investment Company Institute Wednesday reported investors pulled $475 million from the funds in the week ending Nov. 29 after $97 million of outflows the previous week.

"This week's new issue calendar should be well received," said Anders S. Persson, Nuveen's chief investment officer for global fixed income, and Daniel J. Close, Nuveen's head of municipals.