New York City Transitional Finance Authority

The SIFMA Swap Index fell to 3.24% Wednesday, down 50 basis points from 3.74% from the week prior, and 131 basis points from 4.55% it hit on Jan. 24 as swings continued in the VRDO market. Tax-exempt money market funds reversed course to see inflows of almost $4 billion.

The volatility in USTs is giving municipals a difficult run to start February. The asset class lagged the selloff and outperformed the recent rally, which points to its resiliency — but those moves do not come without challenges.

Pennsylvania leads the new-issue calendar with $2.1 billion of GOs in four series via the competitive market while the New York City TFA will bring another $1.4 billion of exempts and taxables.

Municipal mutual fund losses continued last week as the Investment Company Institute reporting investors pulled $2.645 billion from the funds in the week ending Oct. 11. ETFs see more inflows, though.

As valuations got richer after muni outperformance this week, Barclays strategists expect munis to be "truly tested in the next several weeks, with supply picking up."

Despite this, August saw the largest monthly volume of 2023, helped by several billion-dollar deals and multiple Texas school district deals.

"Bearish Treasury moves have kept some pressure on the muni market and prevented an attempt to rally during the summer season when large redemptions trump issuance," BofA Global Research said in a report.

Despite looming economic and social challenges, New York City's economy has proven to be more resilient than projected, New York's comptrollers Brad Lander and Thomas DiNapoli say.

The back half of July is starting "much like the front half with ongoing UST volatility and municipal supply staying in the forefront," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Olson, a 20-year municipal bond veteran, replaces Marjorie Henning who retired at the end of April. In his new position, he will be in charge of the Bureau of Public Finance, which manages the city's borrowing for the comptroller.