Finance

Investors will be greeted Monday with a new-issue calendar estimated at $3.603 billion.

Refinitiv Lipper reported $68.054 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $775.006 million of inflows the week prior.

Inflows continued with the Investment Company Institute reporting investors added $2.194 billion to mutual funds in the week ending Feb. 8, after $1.471 billion of inflows the previous week.

Fitch Ratings received enough inquiries over S&P's action — slashing a Chicago suburb's GO rating by seven notches — that it put out a special commentary outlining differences between the two agencies' analytical approach even though Fitch does not rate the village under scrutiny.

Rating analysts said dropping reserves to 0.25% from 5% to free up capacity does not impact the school bond guarantee program's triple-A ratings.

"Markets were expecting (hoping, praying) to get further confirmation that a peak is in and the decline is at least steady, if not accelerating," said Jan Szilagyi, CEO and co-founder of Toggle AI.

February municipal bond activity compared to last month is brisk yet more finicky in the face of an ongoing supply shortage, according to Jeff Lipton, head of municipal credit and market strategy and municipal capital markets at Oppenheimer & Co.

"This peculiar shape of the muni yield curve has created a conundrum for investors, as all high-quality municipal bonds, with the possible exception of the long end, have become quite rich," Barclays strategists said.

Inflows returned as Lipper reported $775.006 million was added to municipal bond mutual funds in the week ended Wednesday after $361.649 million of outflows the week prior.

A California conduit will price private activity bonds to replace the intakes for a San Diego County water desalination plant.

Although there is some volatility in the municipal market, the landscape is in good shape, according to Cooper Howard, fixed income strategist at Charles Schwab.

"The market started the year with a reduction of the oppressive pressure caused by last year's heavy net outflows from mutual funds," said CreditSights strategists Pat Luby and Sam Berzok.

"We did see some bump in the curve as a result of the FOMC hiking rates by 25 basis points on Wednesday," said Jason Wong, vice president of municipals at AmeriVet Securities. "However, with an unexpected high employment number, fixed-income yields rose."

Friday's payrolls "surprised to the upside, with nonfarm payrolls increasing 517,000 last month after an upwardly revised 260,000 gain in December," Barclays strategists said.

A few developments in recent sessions "may have staying power should the new outlook on upcoming FOMC actions gain traction," said Kim Olsan, a senior vice president of municipal bond trading at FHN Financial.

Bolingbrook called the GO cut to BBB-plus from AA an attempt "to cause a de facto conversion" of a special sales tax district's debt to a general obligation.

"Investors are acknowledging that the Fed is nearing the end of its rate tightening cycle which is supporting a relief rally in stocks and lower bond yields, said Bryce Doty, senior vice president at Sit Investment Associates.

Alex Chilton is the firm's new head of municipal securities. Zach Solomon and David Gallin are co-heads of public finance. 

Total volume for the month was $21.931 billion in 417 issues versus $26.292 billion in 770 issues a year earlier, according to Refinitiv data.

Investors will likely sit on the sidelines until after this week's Federal Reserve Board rate announcement.