Markets

Muni yields fell up to five basis points and dramatically underperformed USTs, as they are wont to do on FOMC days. Treasury yields fell as much as 29 basis points on the two-year and sent the 10-year down closer to the 4% threshold.

The municipal bond rally has brought two big Illinois issuers into the market with plans to sell refunding bonds this week.

Issuers should "absolutely be issuing if possible; the end of year outlook is positive on the surface but substantial volatility lies just below and could arrest or interrupt what have been easier primary market conditions," said MMA's Matt Fabian.

The weakness came as the new-issue calendar grew to $5.9 billion with the addition of a $900 million refunding deal from the Illinois State Highway Toll Highway Authority slated for Thursday. Bond Buyer 30-day visible supply sits at $6.95 billion.

Nuveen's marquee fund has seen the worst performance among the largest high-yield funds so far this year.

The new-issue calendar comes in just over $3 billion, of which is $847 million of state personal income tax revenue bonds from the Empire State Development in three competitive sales.

"Higher education is going to be facing continued challenges in the near term," said Tom Kozlik, managing director at Hilltop Securities.

LSEG Lipper reported Thursday that investors pulled $144.5 million from muni mutual funds for the week ending Wednesday after outflows of $58.9 million the week prior.

Municipal mutual fund losses continued last week as the Investment Company Institute Wednesday reported investors pulled $475 million from the funds in the week ending Nov. 29 after $97 million of outflows the previous week.

Republicans have repeatedly criticized the California high-speed rail project as a waste of taxpayer money.