Economic indicators

For 31 consecutive weeks investors put cash into municipal bond mutual funds but saw just $36.87 million of inflows in the latest reporting period while high-yield funds saw $460 million of outflows after $103 million of outflows a week prior.

ICI reported $704 million of inflows, a $1.1 billion drop from the week prior, bringing the total to $76 billion year to date.

The increase in yields and spread widening across municipal sectors has given some pause to high-yield investors after months of stagnation.

Municipals took a breather Monday, largely ignoring stock market volatility and softer U.S. Treasuries, ahead of a solid $9 billion new-issue week.

Ratios have moved into a higher, more favorable range, especially in the belly of the curve. The municipal calendar is building, led by taxables and refundings, after they dropped significantly in September.

The lower inflows and high-yield outflows can be tied to the correction over the past week and may point to uncertainty from retail investors over broader market volatility.

With a lot of cash still needing to be put to work, the Investment Company Institute showed another large week of inflows at $1.814 billion.

The high-grade muni scales saw cuts of up to four basis points in a continued selloff Monday as the market faces a robust slate of new issues.

Month-to-date returns for municipals are in the red with the Bloomberg Fixed Income Indices municipal index returning -0.12%, high-yield at -0.15% and taxables at -0.32%.

Data released Tuesday reflected a murky picture on the strength of the economy, but the market’s eyes were fixed on the Federal Reserve’s policy meeting in Washington, D.C.

Municipals have been distracted by the robust primary market and that trend will continue next week when another large new-issue calendar greets investors.

Refinitiv Lipper reported $1.3 billion of inflows and an increase in high-yield flows, marking the 28th consecutive week the fund complex saw inflows.

While falling to the lowest amount of inflows since June 2, the total for the year according to ICI at $72 billion, is still on pace to come close to or break the record, $93.2 billion, hit in 2019.

Large new issues from California, New York utilities and airport deals were repriced to lower yields and remained the focus for the municipal market, again ignoring a swing by U.S. Treasuries.

A larger new-issue calendar greets investors with a lot of cash on hand and strategists expect municipal yields to rise as the calendar builds.

The Federal Reserve said Wednesday in its Beige Book report that U.S. economic growth slipped to a more moderate pace between early July and the end of August.

Refinitiv Lipper reported just over $1 billion of inflows into municipal bond mutual funds, an $800 million drop from a week prior, moving the four week moving average to $1.6 billion.

ICI reported $1.99 billion of inflows into municipal bond mutual funds, bringing the total to $69 billion for 2021.

Daily bid-wanteds totals per Bloomberg have fallen to an average par value below $450 million from $640 million per day during the first quarter and $549 million in the second.

Returns of negative 0.40% would be the third-worst August performance of the past 10 years, according to Bloomberg data.