Finance

"If the narrative takes hold that the Fed is behind the eight ball and will need to cut rates several times in the coming months to catch up to the realities of a weaker economy, we expect muni yields will drift lower alongside treasuries," Birch Creek strategists said.

Municipal yields fell four to seven basis points, depending on the curve, while UST yields rallied nine to 30 basis points, with the largest gains on the front end.

Tax-exempt munis have underperformed year-to-date, said David Hammer, a managing director and portfolio manager at PIMCO.

The FOMC held rates steady at the conclusion of its meeting Wednesday and offered no hints regarding a September move.

The muni market has "cheapened and steepened," which is a great opportunity for people still on the sidelines to get into the market again, said Jennifer Johnston, director of municipal bonds research at Franklin Templeton.

School districts are facing many challenges, including less federal funding, increased competition, declining enrollment and inflating costs.

The asset class got a "much-needed boost" from inflows into muni mutual funds last week, said Birch Creek strategists.

The port, which operates Seattle-Tacoma International Airport, received a Moody's Ratings upgrade ahead of a $761 million revenue bond deal slated for next week.

Issuance for the week of July 28 is estimated at $11.035 billion, with $9.018 billion of negotiated deals and $2.017 billion of competitive deals on tap, according to LSEG.

Columbia College Chicago was lowered one notch to BB-plus from BBB-minus by S&P Global Ratings, citing the school's falling headcount and diminished demand.

The top five featured in the ranking handled deals totalling more than $84 billion in par value.

The airport, also selling $412.8 million of new money, will join a bevy of issuers who have deployed a tender offer in the hope of realizing refunding savings.

Investors added $571.5 million from municipal bond mutual funds in the week ended Wednesday, following $224.6 million of outflows the prior week, according to LSEG Lipper data.

Port Freeport's decision to go property tax-free resulted in a revenue bond rating downgrade from S&P and raised disclosure questions.

The fund's sell-off in June shows the challenges of accurate pricing in the high-yield muni market.

Larger dealer networks lead to lower markups, but smaller networks show evidence of potential collusion and market manipulation, the paper said.

Longer-term munis have become more attractive, said Cooper Howard, a fixed income strategist at Charles Schwab.

An academic paper presented at the Brookings Institute's annual conference found that future wildfire risks are already having economically significant impacts on financial markets, municipal borrowing costs and vulnerable communities.

There is a buyer base that is a little bit "skeptical" of longer maturities, but it's more of a retail response, said Adam Congdon, a director at Payden & Rygel.

While the cost of small trades is higher than institutional trades across all fixed-income markets, the gap is more pronounced in the municipal bond market.