Inflation

U.S. Treasuries saw losses pushing municipal to UST ratios on the 10- and 30-year lower again.

The Build Back Better in its current form essentially has been killed by Sen. Joe Manchin, likely limiting the potential for tax hikes in the coming year.

Despite outside pressures, municipal fundamentals are strong with improving credit pictures, issuers flush with federal cash and the ongoing supply-demand imbalance.

Triple-A yield curves were unchanged on the day and mostly have not budged but a basis point in spots since the end of November.

There are $8.127 billion of negotiated deals on tap and a mere $367.4 million of competitive loans slated, none over $100 million. Thirty-day visible supply totals $9.9 billion and net negative supply is at $8.4 billion.

The Investment Company Institute reported $289 million of inflows into municipal bond mutual funds in the week ending Dec. 1, down from $965 million in the previous week.

Thirty-day visible supply drops to $13.54 billion with still a large chunk of new issues to be priced Wednesday and Thursday.

The Investment Company Institute reported $974 million of inflows into municipal bond mutual funds in the week ending Nov. 23, down from $1.430 billion in the previous week.

Powell says the FOMC will consider ramping up tapering when more information about Omicron and its impacts are known, further flattening the UST yield curve.

Rising rates and rising inflation are key concerns for municipal bond buyers.

Economists appear to be less concerned about Omicron, with some saying that even if the variant causes another pandemic wave, it is more likely to "slow rather than interrupt" the global economic recovery.

Former U.S. Treasury Secretary Lawrence Summers said Federal Reserve policy makers are signaling a “new era” in which they recognize the U.S. economy is overheating as inflation runs at its fastest in three decades.

With the leadership questions mostly answered, the Fed must figure out what to do about inflation. The markets expect the Fed will have to raise rates sooner than planned, and perhaps speed up taper to do so.

A large new-issue calendar began pricing in the negotiated and competitive markets, with a few deals bumped off the day-to-day calendar.

State economies are generally stronger than anticipated in the first half of 2021.

Outside influence "beyond the control of the muni bond market" is needed to derail the recent positive momentum.

The Investment Company Institute reported $657 million of inflows into municipal bond mutual funds while ETFs saw $828 million of inflows, a massive increase over the $43 million reported a week prior.

Triple-A benchmarks have fallen double digits since Nov. 1, with the largest moves out long. California, the District of Columbia, Wisconsin and other issuers part of a $6 billion new-issue calendar priced.

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%.