Markets

A mix of broader market dynamics and Chicago-specific pressures is driving the widening spreads, investors said.

Chicago Public Schools plans to return to market with $650 million of Series 2025A unlimited tax general obligation bonds.

Analysts credited governance improvements Connecticut put in place in 2018, which have reduced the state's liabilities and improved its reserves. 

The muni market is in a position to rally in the latter part of this year, said Daryl Clements, a portfolio manager at AllianceBernstein.

Monday's rally is a "continuation of what we are seeing," as the market is actively repositioning where it needs to go, said Alice Cheng, director of municipal credit and investor strategy at Janney.

The market strength is a carryover from Friday, when munis rallied upo 12 basis points after a weaker-than-expected jobs report solidified expectations for a September rate cut. This was the largest single-day rally since April.

Muni yields were bumped two to 12 basis points, depending on the scale, with the largest gains out long, and UST yields fell six to nine basis points, pushing the two-year UST to its lowest levels in over two years.

The rally stemmed from the weak nonfarm payrolls report and revisions brought down the three-month average to 29,000 jobs per month, further solidifying the chance of a rate cut in September, said Chris Brigati, managing director and CIO at SWBC.

Investors added $672.3 million to municipal bond mutual funds in the week ended Wednesday, following $590.4 million of inflows the prior week, according to LSEG Lipper data.

"We are expecting a lot of interest in the offering next week," said Geoff Urbina, managing director, KeyBanc Capital Markets Public Finance.