Inflation

The secondary was quiet and the sole deal of size came from a $400 million-plus competitive water and sewer loan from Portland, Oregon. The recent rise in yields makes for more compelling levels.

Strong demand in the primary market is leading to the oversubscription of many new issues. Municipals and USTs were better again as macroeconomic concerns pressure equities.

Members of the Fed learned the wrong lesson from bizarrely focusing on the 1970s when they said "If history has taught us anything, it's to not let up too soon on inflation."

Disruptions and dislocations associated with more volatile business cycles have already created opportunities for active fixed income management, as the dramatic interest rate increase of 2022 illustrates.

Ellis Phifer, managing director and senior strategist in the fixed income research department at Raymond James, talks with Chip Barnett about the state of the bond markets. (Taped Feb. 16; 15 minutes)

While some sectors have fared better than others, those requiring construction struggle as costs rise.

"I think the bond market is right, a recession is coming," said Liz Young, head of investment strategy at SoFi, "and the economic indicators reinforce that message."

"Bond investors bid a not-so-fond farewell to 2022 as they look forward to a much more attractive 2023," said Bryce Doty of Sit Investment Associates.

The state's benchmark debt ratio for debt service to revenue is at 3.78% — well below a 6% target and 7% limit.

It is not clear whether FOMC members truly believe their higher inflation and interest rate forecasts, or if they are being overly hawkish to prevent further market exuberance.

The Federal Reserve will slow the pace of interest-rate increases next month, Federal Reserve Chair Jerome Powel suggested Wednesday, while stressing borrowing costs will need to keep rising.

Some projects that were budgeted and started at the beginning of the inflation spiral are now in jeopardy.

Third-quarter sales tax collections by local governments in New York increased 10.2% year-over-year, but that falls to 1.8% after adjusting for inflation.

Refinitiv Lipper reported $2.537 billion of outflows from municipal bond mutual funds for the week ending Wednesday after $2.389 billion the week prior.

Investors pulled $3.843 billion from mutual funds in the week ending Oct. 26 after $3.876 billion of outflows the previous week, according to ICI.

The upcoming Federal Open Market Committee meeting on Tuesday and Wednesday has led to a lighter new-issue calendar with $2.72 billion on tap.

Municipal to UST ratios have risen this week with the 10-year approaching 90% and the 30-year topping 100%.

The day after the FOMC announces its policy decision, Christian Scherrmann, U.S. Economist at DWS Group, will offer his take on the meeting, Fed Chair Powell's press conference and what comes next.

"Despite a pick-up in volatility in the rates market, municipals have been performing relatively well in October," according to Barclays PLC.

Refinitiv Lipper reported $2.262 billion of outflows from municipal bond mutual funds for the week ending Wednesday after $2.057 billion the week prior.