Markets

Investors pulled $1.258 billion from municipal bond mutual funds in the week ending Wednesday, following $3.302 billion of outflows the prior week, according to LSEG Lipper data.

With the threat to tax exempt municipal bonds looming in a Congress searching for pay-fors, private activity bonds supporting hospitals and higher education are high on the list of potential first targets.

The Investment Company Institute reported larger outflows for the week ending April 9 of $3.714 billion, following $1.15 billion of outflows the previous week.

Citi's exit may have aggravated illiquidity last week, but even the traditional leader in times of stress wouldn't have been able to calm the wild market moves.

Housing advocates concerned about the fate of private activity bonds are working on strategies for getting PABs and tax-exempt munis off the table while Congress searches for ways to pay for tax cut extensions.

If the muni market "stays here at these new relationships, we'll find its footing," said John Flahive, head of fixed income at BNY Wealth.

Jason Appleson of PGIM Fixed Income chats with Caitlin Devitt to break down the biggest factors shaping the muni market today, and how institutional investors are preparing for what's next.

The firmness in the market Monday came from a "settling down" after one of its most volatile weeks since the pandemic, said Cooper Howard of Charles Schwab.

New York's capital needs mean the city cannot afford to be picky about market timing for bond deals, said Jay Olson, deputy comptroller for public finance. 

Friday saw munis sell off once more with yields cut 17 to 28 basis points, pushing muni-UST ratios higher but not quite reaching Wednesday's levels.