Finance

Issuers routinely refund 5% bonds in year 10, and the resulting savings can be significant. It is notable that although refunding is typically associated with declining interest rates, 5% bonds are refunded even if rates rise.

"We're seeing some of the additional instability and other things come into play," said Dan Genter, CEO of Genter Capital Management.

Bond yields are shooting up for the second time in as many months. Federal Reserve Gov. Christopher Waller attributes the volatility to concerns about rising national debt levels.

"Light demand" for Wednesday's 20-year Treasury bond auction "propelled yields to the nosebleeds and equities to the basement," said José Torres, senior economist at Interactive Brokers.

Samantha Funk will step up as new head of public finance at PNC after Rob Dailey retires at the end of July.

The "risk to the tax exemption appears to have dropped sharply as of last week ... taking with it the hypothetical risk of a supply surge ahead of any end-date for borrowers' exemption access," said Matt Fabian, a partner at Municipal Market Analytics.

"Munis are no longer moving on headlines; they're reacting to rates and supply," which is playing out again Monday after a choppy March and April, said James Pruskowski, chief investment officer at 16Rock Asset Management.

Municipals were cut up four basis points, depending on the curve, through noon.

Rising debt and interest payment ratios over more than a decade, to levels higher than other nations', prompted the downgrade, Moody's said.

Issuance for the week of May 19 is estimated at $11.667 billion.

At a Bond Buyer conference in Atlanta, industry leaders talked about tariff turmoil, the tax-exemption, weather resiliency, infrastructure and more. 

A couple of "bond-friendly" economic reports released Thursday could encourage the Federal Reserve to reduce interest rates in the near future, some analysts argued.

For most investors, partnership matters, said Jamie Doffermyre, head of public finance syndicate and origination at Truist Securities.

While April was a challenging month for muni performance, this summer will be a more supportive environment, said Mark Paris, chief investment officer and head of municipals at Invesco.

The muni market is recovering from tariff turmoil, and is more resilient than the day-to-day volatility suggests, Jamie Doffermyre of Truist Securities said.

Even with Monday's U.S.-China tariff truce and Tuesday's inflation print, the market has felt better over the past several weeks, said Jamie Iselin, managing director and head of municipal fixed income at Neuberger Berman.

Student loan issuers are watching federal policy, from the Department of Education to the tax-exemption, to decide on the timing and size of their annual deals.

Munis yields followed UST yields higher Monday, rising one to four basis points, depending on the scale, but the asset class outperformed USTs.

"In our view, the worst for munis is behind us, at least for now; tax-exempts might continue to outperform, but only to a degree as technicals will remain somewhat challenging," Barclays strategists said.

The recent firmness in the market has been "much appreciated," said Shannon Rinehart, senior portfolio manager of municipal debt at Columbia Threadneedle Investments.