Finance

"The supply/demand dynamic is a headwind for the muni market this week as supply is expected to be elevated," said Cooper Howard, a fixed income strategist at Charles Schwab.

"The ever-shifting narrative regarding President Trump's tariff policies is throwing fuel on the fire of unpredictability," said SWBC's Chris Brigati.

The BDA met last week ahead of the House Ways and Means launching talks on what the reconciliation tax package may include.

State Treasuer Brad Briner said he hopes a longer maximum maturity will lead more borrowers to use the state conduit instead of the Public Finance Authority.

The market rally "took a bit of a breather last week, with yields rising across the curve," said Daryl Clements, a portfolio manager at AllianceBernstein.

In 2017, the BDA hired a lobbying firm as Congress wrote a tax reform bill. This time, the group opted for a strategic communications firm.

"March is not an overly positive month for munis, but a lot will depend on U.S. Treasuries," said Barclays strategist Mikhail Foux.

The $550 million deal from an issuer with two triple-A ratings includes about $250 million for refunding and an $85 million taxable piece.

"Markets fixate on one risk at a time, and there's no shortage right now. Volatility has spiked, liquidity is thin, and buyers are sidelined — but that's temporary," said James Pruskowski, chief investment officer at 16Rock Asset Management.

Issuance remains heavy this week, but while it's elevated, the muni market is "structurally undersupplied," meaning if 2024's record level of $500 billion-plus of issuance was doubled, the market could still digest it quite well, said Wesly Pate, a senior portfolio manager at Income Research + Management.

Short-end U.S. Treasuries rallied mid-morning, while UST yields were little changed out long, but ended the day weaker across most of the curve with the greatest losses out long. Munis were steady throughout the day.

S&P Global Ratings primarily cited a "precipitous decline" in unrestricted cash to explain its triple-notch downgrade of the system.

"Apathy and caution" were the theme of the past week, said Birch Creek strategists.

The Trump administration wants to shed federal office space, and bonds backed by those leases are feeling the heat.

The $2.5 billion Brightline West and $849 million Hawaii deals stood out among the rash of issuances last month alongside the ongoing tax exemption debate.

New York City leads the negotiated calendar with $1.4 billion of GOs, followed by the Regents of the University of California with $1.2 billion of general revenue bonds.

While UST yields rose up to five basis points out long Thursday, the current rally "that has taken the 30-year UST closer to where the 10-year yield traded a week ago has not impacted the same range in munis," said Kim Olsan, senior fixed income portfolio manager at NewSquare.

It has been a bit of a "heavy start" to the year for issuance, said Jeff Devine, a municipal research analyst at GW&K.

The rating agency cited the state's ample reserves, robust natural resource base and critical role in U.S. strategic interests.

Muni prices continue to "show relative resilience" despite a nearly record pace of issuance, said Matt Fabian, a partner at Municipal Market Analytics.