Finance

Some states and local governments "went on spending sprees" with pandemic funds and "got ratings upgrades that didn't have a lot to do with fiscal management," said an investor.

With front-end rates off so much Thursday morning, "liquidity providers backed off noticeably in the morning in terms of bid with offers slow to follow," said Matt Smith, founder and CEO of Spline Data, noting it was likely a response to elevated bids wanted counts, along with rates.

A Fitch rating analyst pointed to the school system's elevated long-term liability burden that could be exacerbated by future voter-approved bonds.

The parent of New York's Metropolitan Opera fell deeper into junk-bond status this week, while the New School university has a lower investment-grade rating.

Currently, it's a Goldilocks market, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital: "Just right enough for just enough people, and steady [enough] that there doesn't seem to be any [big] price pressure at the moment."

There is a lot of money out there, and investors seem comfortable putting it to work.

In this Market Intelligence analysis, Jeff Lipton warns that granting states access to Chapter 9 would be deeply disruptive, likely forcing muni yields higher and liquidity lower, while underscoring why states' legal protections and reserves still support strong willingness to pay.

"A lot of the perception is the Iran situation and energy and everything else is temporary, so if municipal yields are higher, let's take advantage of it," said Pat Luby, head of municipal strategy at CreditSights.

If "we get another day of this, that will help the markets continue to trade in a better place," said Jock Wright, an underwriter at Raymond James.

State authorization for $1.35 billion of taxable ratepayer-backed bonds sold in 2022 for Oklahoma Natural Gas Company is being contested in court.

"We're still seeing continued yield pressure out there from the market outlook investors have with the conflict in Iran," said Ajay Thomas, head of public finance at FHN Financial.

The March/April period is typically a softer period for the muni market, said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory.

Market Intelligence analyst Jeff Lipton assigns a stable yet guarded view to airport bonds, highlighting how gateways and large hubs can outperform as fuel costs, travel demand and geopolitical risk evolve — while investors sharpen focus on leverage, rate recovery and cyber defenses.

The Aa2 rating was affirmed, but the negative outlook could raise the stakes as New York lawmakers debate the city's budget gap.

"There was a certain amount of resilience munis had in the last week, comfortable enough with distribution," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital Markets. "But the 10-year Treasury backing up behind 4.20%, it proved to be the catalyst for adjusted bid-sides."

At least two local agencies missed debt service payments after the Cook County, Illinois, treasurer's office was unable to issue property tax bills on time.

This week, "look for deals to get priced to attract demand," said Pat Luby, head of municipal strategy at CreditSights, and Wilson Lees, an analyst at the firm.

Many muni participants stayed on the sidelines to start last week due to "the sudden about-face in the Treasury market and uncertainty over how long-lasting the incursion would be," Birch Creek strategists said.

The latest research from The Bond Buyer predicts supply and issuance volume will grow in the months ahead.

"We are still not overly concerned about the effect of the geopolitical concerns on municipals — in our view, the muni market is well insulated," said Barclays strategists.