Markets

Both IG and HY indices will likely end this year richer versus USTs and their benchmarks, "leaving very little cushion to absorb rate volatility," said Barclays strategist Mikhail Foux.

"It's an unfortunate part of doing business," said an investor.

San Francisco's "tepid" recovery from the pandemic was cited by Fitch.

While Friday's muni session was muted, the damage of a volatile UST market, paired with low new-issue supply and year-end positioning, has weighed on the asset class in December.

High-yield funds saw outflows of $413.6 million compared to the previous week's outflows of $71 million.

In the remaining days of this year, "taxable rates continue to be pressured but munis are finding a stable, even supportive, bidside," said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.

Moody's Ratings said the 2025 budget that passed Chicago's City Council this month won't materially alter the credit profile of the city, which it rates Baa3.

The Trump administration will bring a shift in infrastructure priorities.

Munis "continued their slide" last week as yields rose an average of 23 basis points across the curve as the Fed Chairman Jerome Powell signaled the Fed will take a "more cautious approach" on interest rate cuts next year, said Jason Wong, vice president of municipals at AmeriVet Securities.

The budgeting constraints transformed the state's finances and bond ratings. But critics say the policy's downsides include the stifling of needed investments.