Munis saw small cuts on Friday as short-term U.S. Treasuries cheapened and equities ended lower.
Muni yields cheapened by up to three basis points, depending on the scale. USTs cheapened by up to four basis points, with the biggest losses at the front end.
The August nonfarm
"Munis are struggling to find direction but underneath the market remains strong," Pruskowski said. "But seasonality here deserves more weight as rates and ratios continue to rise."
Primary to come
Issuance is an estimated $13.403 billion for the week of September 7, with $10.5 billion of negotiated deals on tap and $2.9 billion of competitives, according to LSEG.
The Alabama Toll Road, Bridge and Tunnel Authority leads the negotiated calendar with $3.71 billion of toll revenue bonds and anticipation notes and project revenue bonds, to be sold across four series, followed by New York City with $1.81 billion of general obligation bonds.
The competitive calendar is led by Minnesota with $1.02 billion of GOs to be sold across five series.
Employment report
The August employment report was called "unequivocally strong" by Olu Sonola, Fitch Ratings head of U.S. Economics, and "gives the Fed ample room to maintain that the labor market is stable and the economy remains at full employment."
But the upcoming consumer price index is "the real event risk," Sonola said.
FHN Financial Chief Economist Chris Low said the stronger-than-expected report was "not strong enough to rattle the Fed in any meaningful way, especially with the drop in year-on-year average hourly earnings growth. That said, if the [Federal Open Market Committee] is inclined to hike rates on September 16, there is nothing on the employment side to stop them."
"U.S. Treasury yields are climbing as this report likely leaves a Sept. 16 Fed rate hike on the table, depending on next Friday's August CPI inflation report," said Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, noted, "there are plenty of reasons to raise interest rates (to fight inflation) and [fewer] reasons to keep rates unchanged (to support the labor market)."
He will watch the stock market for clues. A rally, he said, "will indicate the optimism around the AI build-out — and extremely strong corporate earnings — are the most important factors, and Fed rate changes are less important for investor psychology."
"Monetary restraint should depress term premiums/breakevens and help long duration outperform," said Brad Conger, chief investment officer at Hirtle & Co.
"For the Fed, there is little here to challenge the view that inflation remains the primary concern," said Seema Shah, chief global strategist at Principal Asset Management. "Markets may edge up their expectations for a September hike following today's release, but next week's CPI report is still likely to be the key swing factor for policy."
