FOMC

"We need to see more evidence to convince us that inflation is well on our way back down to 2%," Federal Reserve Bank of Minneapolis President Neel Kashkari said.

"I think the risks to inflation are still on the upside," Federal Reserve Bank of Cleveland President Loretta Mester said. "I think the risk to the labor market is dual-sided."

"It is important to remember that as long as the Fed's next move is to lower policy rates, bonds will do well," said Jack McIntyre, portfolio manager at Brandywine Global. "The employment market is in better balance, which is very important for the Fed — even more than inflation."

"We will remain cautious until CPI and the FOMC are in the rear-view mirror and as long as these don't catalyze a sell-off (since that would trigger outflows) or catalyze a sharp rally (as municipals lag rates during a sharp rally and ratios can increase optically) ... " said Vikram Rai, head of municipal markets strategy at Wells Fargo.

With no change in rates expected, analysts are interested in the dot plot and Fed Chair Jerome Powell's press conference.

While particpants expect some pressure in the near-term with more than $16 billion on tap, they also say the current yield and ratio levels offer investors opportunity.

"The Fed is going to have to pivot — not on the basis of inflation numbers, but the basis of the real economy," Mohamed El-Erian said.

New York Fed President John Williams said the Fed "will cut rates eventually" during a fireside chat at Milken Institute's Global conference on Monday.

The "historical runway" heading into Memorial Day is favorable, rolling into the summer redemption months of June through August, said James Pruskowski, chief investment officer at 16Rock Asset Management.

Munis posted losses in April, returning negative 1.24%. The asset class is also seeing losses of 1.62% year-to-date.

"The Fed is certainly not going to be overly concerned about the growth backdrop" at this week's Federal Open Market Committee meeting, said BMO Chief Economist Douglas Porter.

Recent economic data have shown inflation stubbornly above the Fed's 2% target, putting rate cuts in jeopardy. Lauren Saidel-Baker, an economist with ITR Economics, parses the FOMC meeting, Chair Powell's press conference and takes a look at future policy.

The minutes underscored officials' reluctance to lower rates until they have more evidence inflation is firmly on a path to 2%, the rate they see as the sweet spot in a healthy economy.

The ISM report "feeds into the narrative coming out of last week," whereby the economy's resilience enables the Fed "to be patient," said Gregory Faranello, head of U.S. rates trading and strategy for AmeriVet Securities. For the bond market, that means rates stay "higher for longer."

D.A. Davidson Director of Wealth Management Research James Ragan will review and analyze the March Federal Open Market Committee meeting.

"The risks to achieving our employment and inflation goals are moving into better balance," Cook said.

LSEG Lipper reported fund inflows of $63.8 million for the week ending Wednesday following $300.5 million of inflows the prior week. High-yield saw its 11th consecutive week of inflows at $180.4 million, down from $278.6 million the week prior.

"The balance of March may continue to be better-than-expected, particularly given existing demand and decent reinvestment needs over the next 30 days," according to Oppenheimer's Jeff Lipton.

Analysts ponder what the Fed will do this year with a March cut ruled out amid recent reports of higher-than-expected inflation.

Supply is expected to increase in the coming weeks, and there may be more rate-direction volatility, said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.