Buy side

The municipal bond market is gearing up for what it expects will be a strong primary this week.

Municipal issuers are gearing up to sell more than $9 billion of new issuance this week -- dominated by a $2.9 billion Texas transportation offering -- and hope their financings benefit from the momentum of the previous two trading sessions.

Inexpensive prices on new issues lured buyers back into the marketplace as municipal bond market resumed its slump during the past week.

The Bond Buyer's weekly yield indexes rose the week ended July 11.

Investor demand for tax-exempts remained tepid as outflows from muni bond funds for the week of July 10 accelerated to $1.2 billion from $870 million the prior week.

Following last month's historic sell-off, the municipal market offers solid fundamentals and the most compelling value since 2011, additionally bolstered by the strong demand from July and August reinvestments and the demand from crossover buyers, BlackRock Inc. said in its July municipal report.

A $700 million Denver Airport System financing and a $634 million California Health Facilities Financing Authority sale will dominate the primary market this week as more than $6 billion greets investors returning from a long holiday weekend that may be ready, willing, and able to reinvest July 1 cash after a short hiatus.

Modest inflows of $903.9 million crept back into municipal money market funds as total net assets inched up to $262.38 billion in the week ended July 1, according to The Money Fund Report, a service of iMonetNet.com.

Early indications of July 1 reinvestment appeared mediocre this week as investors took a much-need break from the municipal market – some preoccupied by the Fourth of July holiday and Friday's June employment figures, others still reeling from the volatility of the historic sell-off two weeks ago, municipal players said.

The recent market selloff battered municipal bonds unevenly, as those investors holding credits with higher coupons fared the best.

June, traditionally a strong month for municipal bond issuance, provided more bad numbers in a difficult period for the market. Long-term muni bond volume for June plunged 46.5% from the same period in 2012.

After the selloff municipal strategists preparing for the start of the third quarter were torn between taking advantage of buying opportunities and being ultra conservative to protect assets from future weakness.

The muni market, reeling from one of the worst selloffs in 25 years this week, witnessed record-breaking outflows to muni bond funds of $4.53 billion for the week of June 26.

The Bond Buyer's weekly yield indexes posted pronounced losses the week ended June 27, reflecting the market selloff.

Municipal bond mutual funds that report flows weekly recorded $4.53 billion in outflows for the week of June 26, Lipper FMI numbers showed, after $2.22 billion of outflows reported the previous week.

Tax-exempt money market funds had outflows of $314.7 million in the week ended June 24, decreasing total net assets to $261.48 billion, according to The Money Fund Report, a service of iMoneyNet.com.

Falling yields for single-A and triple-B bonds with longer maturities on Tuesday signaled the municipal market was ready to pause after one of the heaviest selloffs in more than two decades.

Current tax-free yields are attractively priced compared to Treasuries, creating opportunity for municipal investors, says Alan Schankel of Janney Capital Markets.

Municipal bond investors, spooked that interest rates' climb from record lows is accelerating, continue to pull money from the market in record-breaking droves.

The Bond Buyer's weekly yield indexes increased significantly the week ended June 20.