Buy side

Most of the selling during tax season happens on the front end of the curve, said Wesly Pate, senior portfolio manager at Income Research + Management.

The Washington refunding deal is built on an extraordinary optional redemption of Build America Bonds despite criticism from investors who hold them.

The extraordinary redemptions being used to call Build America Bonds "are based on a creative but flawed legal argument driven by the current change in interest rates," said Kramer Levin partner Amy Caton.

Citi's exit comes amid the larger trend of broker-dealers downsizing balance sheets, which can hurt secondary market liquidity, particularly in times of stress. Other market players are coming into the fold.

Narens' hiring complements Stifel's public finance practice and the types of deals the firm is doing, said Betsy Kiehn, managing director and head of Stifel's Municipal Capital Markets Group.

Market participants said it is yet to be seen whether issuers will pull back their BABs refundings due to concerns after several bondholders sent a letter to the trustee on a Regents of the University of California deal, saying it was "prohibited" from executing the redemption.

High-yield and taxable munis continue to outperform, supply grows but concentrates in larger deals led by $3 billion of state personal income tax revenue bonds from the Dormitory Authority of the State of New York next week.

One investor is offloading the debt, while another sees an opportunity.

Several investors in a challenge to a University of California Regents Build America Bonds redemption "may give issuers additional reason for pause when vetting similar refundings," J.P. Morgan strategists said.

Harvard and Princeton coming to market is a "huge sign of confidence," said Clare Pickering, a Barclays strategist.