Short-term munis sold off once again on Friday, as U.S. Treasuries were firmer throughout most of the curve and equities ended higher.
Muni yields cheapened by up to 12 basis points, with the worst losses at the front of the curve and the long end seeing smaller cuts. UST richened throughout most of the curve, with yields falling by up to eight basis points, as USTs 20 years and in retreated from their recent highs.
Municipal market conditions suggest the beginnings of a negative feedback loop, according to J.P. Morgan analysts led by Peter DeGroot. Underperformance is begetting outflows, and outflows are begetting underperformance.
"We expect this will likely persist until the rates backdrop is more settled," they wrote. "That said, the fact that taxable equivalent yields are at levels that we have not seen in decades should attract considerable income-oriented capital to municipals over time as rate volatility subsides."
Primary to come
Issuance is an estimated $10.011 billion for the week of Sept. 28, with $8.79 billion of negotiated deals on tap and $1.221 billion of competitives, according to LSEG.
The Municipal Improvement Corp. of Los Angeles leads the negotiated calendar with $1.81 billion of Los Angeles Convention Center lease revenue bonds, followed by the New Jersey Transportation Trust Fund Authority's $1.7 billion of refunding transportation program bonds.
The competitive calendar is led by Thornton, Colorado, with $199.89 million of water enterprise revenue bonds.
