Economic indicators

Investors pulled more from municipal bond mutual funds in the latest week, with Refinitiv Lipper reporting $2.875 billion of outflows, down from $3.548 billion of outflows in the previous week.

In a recent survey, just over half of community bankers expressed concern that the central bank will harm the U.S. economy by raising rates too fast in its quest to contain inflation.

The Economic Development Bank estimated the first half of fiscal 2022 had experienced a 5.5% increase in growth, upward from a 3.6% increase in previous estimates.

Ten states, includeing five in the Southeast, pre-pandemic employment levels in January, according to Fitch Ratings. In an update, the U.S. Labor Department reported Florida’s seasonally adjusted unemployment rate fell to 3.3% in February.

Outflows continue but dropped significantly in the latest week with Refinitiv Lipper reporting $662 million of outflows from municipal bond mutual funds following $2.823 billion the week prior.

Russia’s invasion upends a return to normal as the economic impact of COVID-19 wanes, UCLA Anderson Forecast economists said.

Ongoing turmoil in the Ukraine is roiling markets, municipals included. Refinitiv Lipper reported more outflows, with high-yield seeing $818.218 million pulled out in the latest week.

Between the long holiday weekend and investors trying to absorb the Russia-Ukraine developments, it was a slow start to the week in the municipal market.

Refinitiv Lipper reported $238.926 million of outflows, but $182.035 million of inflows to high-yield, reversing last week's outflows. New-issues faced concessions.

The 2-, 5- and 10-year UST is higher than before the pandemic began as investors factor in a rate hike as soon as March.

The largest deal of the week comes from the New York City Transitional Finance Authority with $950 million of exempts and $250 million of taxables.

Net supply pressure among tax-exempts is expected to worsen in January compared to last year and the move toward richer tax-exempts is unlikely to reverse. "Dealers seem to be acknowledging this looming challenge," MMA notes.

Investors will also receive $139 billion of interest payments in 2022, about $593 million more than in 2021, according to a report from CreditSights.

Municipals are sitting out the ups and downs in equities and UST, with $12 million scheduled for the primary in the final week of 2021.

“Our state’s strong economic recovery has accelerated back to pre-pandemic levels for unemployment and GDP,” said Gov. Bill Lee.

The weaker-than-expected employment report sent U.S. Treasury yields lower and equities sold off. Munis did what they've been doing — mostly ignored it.

Refinitiv Lipper reported a significant drop in municipal bond mutual fund inflows at $36 million in the latest week, a signal the volatility of other markets may be creeping in. High-yield saw $53 million of inflows.

ICI reported $1.43 billion of inflows into municipal bond mutual funds in the week ending Nov. 17, down from $1.61 billion in the previous week.

For 35 weeks in a row, investors have put cash into municipal bond funds as Refinitiv Lipper reported $603 million of inflows while high-yield funds eked out a gain of slightly more than $1 million.

After the FOMC made taper official, high-grade benchmark yields ended the day one to three basis points better while USTs ended the day higher after an up-and-down trading session that moved the 30-year back above 2%.