Markets

Two ratings agencies expect AES Puerto Rico to default on Puerto Rico municipal conduit bonds.

S&P raised Massachusetts' general obligation long-term credit rating to AA-plus from AA.

For long-term muni bonds, BofA strategists noted that macro market and supply/demand conditions "are dominating the picture, pushing the high-grade muni market to a relatively rich valuation versus Treasuries."

A John Miller-less speculative bond market may mean more diversification and price transparency, say some investors.

For the week ending Wednesday, outflows intensified as Refinitiv Lipper reported $255.794 million was pulled from municipal bond mutual funds after $91.713 million of outflows the week prior. High-yield saw inflows.

The Southern California Public Power Authority plans to price $700 million in revenue bonds for improvements to a 488-mile power transmission system.

Strong demand in the primary market is leading to the oversubscription of many new issues. Municipals and USTs were better again as macroeconomic concerns pressure equities.

The upgrades add to the city's ratings upswing across credits that Mayor-elect Brandon Johnson will inherit from Mayor Lori Lightfoot.

Brian Wynne joins Jefferies as co-head of the municipal syndicate, while Morgan Stanley continues to see turnover in its muni ranks.

The second half of 2023 may see a slowdown, perhaps even a mild recession, said Daniel Close, the newly named head of municipals at Nuveen.