Finance

"Weaker performance is in part driven by higher permanent labor costs," Moody's said. "These elements highlight rising human capital and financial strategy risks under Moody's ESG classification and are key drivers of this rating action."

New York City's $1 billion deal was re-priced to lower yields and a tax-exempt and taxable deal for the NFL's Tennessee Titans new stadium priced.

Fitch joined S&P Global Ratings in assigning a gilt-edged rating to the city, ahead of a planned general obligation deal later this month.

Municipals followed U.S. Treasuries firmer after markets reacted to the Moody's downgrade of several mid-sized U.S. banks. New issues saw good demand and repriced to lower yields as a result.

While triple-As were little changed the past two sessions, some damage was done last week, leaving market participants generally less optimistic for the final weeks of August.

Moody's Investors Service upgraded the Connecticut capital city's issuer rating to Baa3 from Ba2.

Late summer is "rarely a good time for our asset class," Barclays strategists said, noting the municipal investment grade index lost money in August three years in a row, and 2023 seems to follow this trend.

"The limited scope of muni debt affected suggests a marginal impact on the muni market, if any," BofA strategists said.

The 1998 Master Settlement Agreement from the Big Tobacco companies offers a template, but experts say the structure of the opioid settlement differs in key ways when it comes to state and local governments spending the money.  

The Tennessee Valley Authority has $19 billion of outstanding bonds and provides power to 10 million people.

Municipal bond mutual fund saw outflows return with Refinitiv Lipper reporting investors pulling $989.852 billion from funds for the week ending Wednesday, led by ETFs and long-end funds.

The revenue bonds were issued through the California Municipal Finance Authority on behalf of LAX Integrated Express Solutions, the P3 project developer.

J.P. Morgan held a one-day retail order for $1.65 billion of revenue bonds from the Dormitory Authority of the State of New York, while Minnesota sold $1.02 billion of GOs in the competitive market in five deals.

This week kicks off a flip of calendar to the final month of the summer reinvestment season and one of the larger new-issue calendars of the year.

July's total volume was $25.939 billion in 542 issues, down from $28.258 billion in 619 issues a year earlier, the smallest percentage drop in monthly issuance year-over-year in 2023, according to Refinitiv data.

For the coming week, investors will be greeted with a larger new-issue calendar led by large New York and Texas ISD issuers, along with gilt-edged Minnesota selling competitively.

Municipal bond mutual fund saw inflows with Refinitiv Lipper on Thursday reporting investors added $552.219 million to funds for the week ending Wednesday following $1.040 billion of outflows the previous week.

The Investment Company Institute reported investors added $453 million to municipal bond mutual funds in the week ending July 19, after $111 million of inflows the previous week.

The offered side "has continued to pack the primary market with value to manage their (and the market's) potential downside if disruption did occur; this also helps the context for muni buyers headed into the Fed," said Matt Fabian, partner at Municipal Market Analytics.

"Longer-dated bonds look attractive, as investors are locking in long-term rates before the expected decline in 2024," while "a tremendous amount of money is also invested in the short end of the curve," Nuveen strategists said.