Markets

"Markets were expecting (hoping, praying) to get further confirmation that a peak is in and the decline is at least steady, if not accelerating," said Jan Szilagyi, CEO and co-founder of Toggle AI.

February municipal bond activity compared to last month is brisk yet more finicky in the face of an ongoing supply shortage, according to Jeff Lipton, head of municipal credit and market strategy and municipal capital markets at Oppenheimer & Co.

Muni issuers are staunchly opposed to what they characterize as an unfunded mandate that provides limited benefits.

Total volume in 2022 was at $389.094 billion in 9,123 deals, down 19.5% from the $483.358 billion in 13,130 deals in 2021, according to Refinitiv data.

The transportation bond sector may see the greatest growth in 2023 as a result of the infrastructure act, one analyst said.

"This peculiar shape of the muni yield curve has created a conundrum for investors, as all high-quality municipal bonds, with the possible exception of the long end, have become quite rich," Barclays strategists said.

Inflows returned as Lipper reported $775.006 million was added to municipal bond mutual funds in the week ended Wednesday after $361.649 million of outflows the week prior.

A California conduit will price private activity bonds to replace the intakes for a San Diego County water desalination plant.

Although there is some volatility in the municipal market, the landscape is in good shape, according to Cooper Howard, fixed income strategist at Charles Schwab.

"The market started the year with a reduction of the oppressive pressure caused by last year's heavy net outflows from mutual funds," said CreditSights strategists Pat Luby and Sam Berzok.