Finance

Utilities paid sky-high prices for natural gas and power during Winter Storm Uri, leading to the issuance last year of nearly $2.9 billion of bonds to cover those costs.

The bond division undertook two transactions last week to retire outstanding taxable public education capital outlay and state revolving fund bonds. The transactions used $200 million in program funds, along with additional money, to pay down $400 million in state debt.

The back half of July is starting "much like the front half with ongoing UST volatility and municipal supply staying in the forefront," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Long-duration and shorter-coupon munis saw ample demand last week. Investors, believing rates will fall as early as the first part of next year, continue to lock in long-bond yields, Nuveen strategists said.

Nonprofit assisted living and nursing home bonds continue to be under stress, with defaults and impairments on the rise.

Bond Buyer 30-day visible supply climbs to $13.42 billion while the new-issue calendar is led by a $1 billion-plus New York City Transitional Finance Authority future tax-secured subordinate deal.

Proceeds from the sale will be used to fund infrastructure projects in the city's $164.8 billion 10-year capital plan.

Municipal bond mutual fund outflows continued as Refinitiv Lipper reported investors pulled $136.174 million from the funds for the week ending Wednesday following $855.719 million of outflows the week prior.

"The bond market finally got the relief from inflation it was hoping for," said Bryce Doty, senior vice president and senior portfolio manager at Sit Investment Associates. 

With the third quarter officially under way, municipal bond experts say the tax-exempt market is poised for better performance and stronger market technicals ahead in the second half.

Nick Venditti of Allspring Global Investments talks about evolving demand components, compelling yields and expectations for second half performance. Jessica Lerner hosts. (24 minutes)

This week should see a return to more normal supply, which might be a little higher than average for the year so far, said Daniel Solender, partner and director of tax-free fixed income at Lord Abbett & Co.

BofA Securities remained at the top of the list, with $22.948 billion, accounting for 13.4% of the market, but the rest of the top 10 saw some shuffling.

For the coming week, investors will be greeted with a new-issue calendar estimated at $7.282 billion.

Municipal bond mutual fund outflows intensified as Refinitiv Lipper reported investors pulled $855.719 million from the funds for the week ending Wednesday following $25.331 million of outflows the week prior.

The upgrade "is driven by sustained improvements in the city's income tax collections and the city's superior gap-closing capacity," Fitch said.

The Investment Company Institute reported investors pulled $136 million from municipal bond mutual funds in the week ending June 28, after $338 million of inflows the previous week.

Much uncertainty remains as the second half of the year begins, with Federal Reserve rates, recession and inflation all still to be decided.

"Lower volumes, lighter primary issuance, and heavier reinvestment cash flows are likely going to contribute to a continued bout of muni relative performance," said Birch Creek Capital strategists.

For the coming week, investors will be greeted with a new-issue calendar estimated at $304.5 million. This marks the lowest week of issuance in 2023.