Buy side

Moody's Investors Service on Friday delivered a two-notch downgrade to Puerto Rico's general obligation bonds, a deeper, more far reaching cut than the one imposed by Standard & Poor's three days earlier.

Puerto Rico's planned debt issue may still find demand among mutual funds after the commonwealth was cut to a junk grade by Standard & Poor's, even though some fund managers are restricted from buying speculative paper.

Bond Buyer indexes were mixed the first week of February.

S&P revised the outlook to negative on CCC-rated bonds for South Carolina's Tuomey Healthcare due to a $277 million fraud judgment and operating losses.

Municipal mutual funds reported $227.3 millon of net outflows, ending three-week run of inflows, Lipper FMI reported Thurday.

Tax-exempt money market funds pared back outflows compared to last week, but still lost $426.6 million, reducing total net assets to $268.87 billion in the week ended Feb. 3, according to The Money Fund Report, a service of iMoneyNet.com.

Fitch Ratings downgraded more than $7 billion of general revenue bonds issued by the University of California to AA from AA-plus.

The state of Illinois will thunder into the primary market this week with a $1 billion sale of general obligation bonds, hoping to feed supply-hungry investors after a sluggish start to the New Year.

Municipal bond mutual funds reported inflows for a third consecutive week as they took in $338 million of net inflows for the week ended Jan. 29, Lipper FMI numbers showed.

Tax-exempt money market funds lost $2.29 billion in the week ended Jan. 27, as total net assets dipped to $269.29 billion, according to The Money Fund Report, a service of iMoneyNet.com.

A slew of research reports in the last month have touted the opportunities in the tax-exempt asset class, as interest-rates rallied and municipal prices firmed. Analysts credited everything from the return of mutual fund inflows and low volume to U.S. economic concerns and volatility overseas.

Remarketing $700 million of variable-rate debt last year has helped New York's MTA position itself in a volatile market, finance director Patrick McCoy said.

Municipal bond issuance will stay light in the coming week, rising to $4.89 billion, as the calendar offers little to sate investors' growing hunger for tax-exempt paper.

Bond Buyer indexes slid for the third week in a row.

Inflows to municipal bond mutual funds continued for a second straight week, at just $86 million, for the week ended Jan. 22.

The Massachusetts pension reserves investment trust fund returned 15.2% in calendar 2013, marking an investment gain of $7.9 billion, according to the Pension Reserves Investment Management board.

The primary market will be dominated by new-issue activity in the Northeast, led by a $1 billion Port Authority of NY & NJ consolidated bond issue that will be part of $5 billion of new volume expected.

Municipal bonds continued to rally the past week, with U.S. economic data suggesting a slow recovery just as mutual funds showed renewed investor interest in tax-exempt bonds

Municipal bond demand should increase in 2014 in an environment of expected higher interest rates, improved economic growth, lower issuance and richer valuations to Treasuries.

The Bond Buyer's weekly yield indexes plunged in the week ended Jan. 16.