Munis weakened on Monday, as U.S. Treasuries cheapened and equities ended lower.
Muni yields were cut by one to five basis points, depending on the scale. On the MMD curve, the 30-year muni reached its highest point year-to-date. UST yields rose five basis points, with the largest losses out long.
Munis' losses stemmed in part from UST losses, said Pat Luby, head of municipal strategy at CreditSights; both munis and USTs are experiencing pressure from inflation and potential Federal Reserve policy moves.
While the week before Labor Day can be sleepy, this week is unlikely to be quiet, Luby added. Investors will receive September's redemption money, there's a sizable new-issue calendar and unemployment data is scheduled for release on Friday.
This week marks the end of the "summer redemption season," Luby said, and the ensuing reduction in redemptions will lead to an increase in net supply. "Some issuers will have no problem coming into the market and finding good demand, but ... some credits may have to come a little bit cheaper."
