Finance

The market strength is a carryover from Friday, when munis rallied upo 12 basis points after a weaker-than-expected jobs report solidified expectations for a September rate cut. This was the largest single-day rally since April.

Muni yields were bumped two to 12 basis points, depending on the scale, with the largest gains out long, and UST yields fell six to nine basis points, pushing the two-year UST to its lowest levels in over two years.

The rally stemmed from the weak nonfarm payrolls report and revisions brought down the three-month average to 29,000 jobs per month, further solidifying the chance of a rate cut in September, said Chris Brigati, managing director and CIO at SWBC.

Investors added $672.3 million to municipal bond mutual funds in the week ended Wednesday, following $590.4 million of inflows the prior week, according to LSEG Lipper data.

A injunction blocked the service cuts that would have balanced SEPTA's budget. 

Looking solely at internal factors, "the municipal market itself is still doing well, reasonably via the temporary drop in new issue supply amid a more lasting reduction in reinvestment flows," said Matt Fabian, a partner at Municipal Market Analytics.

BondLink's client issuers reached over $500 billion in bond sales while working with the municipal bond platform.

The underwriting firm's hires will expand its real estate development finance group and Southeast operations.

Thanks to strong technicals and the anticipated interest rate cut by the Federal Reserve at its September meeting, municipal bonds posted positive returns of 0.87% in August, reversing their losses of 0.20% in July, according to Jason Wong, vice president municipals at AmeriVet Securities.

Issuance for the week of Sept. 2 is at an estimated $7.457 billion, with $6.179 billion of negotiated deals and $1.278 billion of competitive deals on tap, according to LSEG.

Legacy Health, an eight-hospital Portland, Ore.-based healthcare system, that abandoned merger plans in May received a downgrade and negative outlook from Moody's Ratings.

The world's biggest opera house has been downgraded for the second time this year.

With the break in issuance this week, the market has firmed a bit, said Tim McGregor, managing partner at Riverbend Capital Advisors.

While issuance has been on a record pace this year, this week sees a slight slowdown in activity, caused by participants going on vacation, said Jeff Timlin, a partner at Sage Advisory.

While issuance is up year-over-year, weeks like this can be difficult to find the right deals, said Whitney Fitts, director of municipal portfolio management at Appleton Partners.

"We expect subdued activity again [this] week heading into the Labor Day holiday," Birch Creek strategists said.

Munis underperformed a UST rally, which had everything to do with Powell's speech at the Jackson Hole symposium and future Fed action, said Cooper Howard, a fixed income strategist at Charles Schwab.

San Francisco Bay Area Rapid Transit has struggled to regain ridership after the pandemic.

A state lawmaker is asking the court to invalidate a 2022 nearly $700 million bond sale due to inadequate audits by the Oklahoma Corporation Commission.

A possible explanation is that the massive inflows into mutual funds are a parallel move to large inflows into the Capital Group Municipal High-Income ETF, which saw the biggest inflow of a ETF on Friday at $1.5 billion, said Pat Luby, head of municipal strategy at CreditSights.