Investment funds

Issuance was led by a $2 billion retail pricing from the University of California in the negotiated market and a $1.2 billion competitive deal from Washington.

There are eight municipal bond interval funds, three of which launched last year, promising fewer liquidity constraints and the potential for higher returns.

Munis "responded in part to a better UST session [Wednesday] but weren't in a position from a supply standpoint to attempt to match the 10-15 basis point rally in taxables," said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.

The muni market also faces an elevated new-issue calendar, which may put additional pressure on muni yields. Bond Buyer 30-day visible supply sits at $17.57 billion.

The management team sees opportunity in pockets that other investors avoid, like American Dream, Midwestern private colleges and senior living facilities.

Sizable deals for next week include $1.3 billion of real estate transfer tax revenue bonds from the Triborough Bridge and Tunnel Authority and $996.335 million of second series revenue bonds from the San Francisco International Airport.

The Federal Reserve will be more cautious and slow rate cuts going forward, according to minutes of the December Federal Open Market Committee meeting, released Wednesday.

"These opportunities will surface periodically throughout the year against heavy supply and the increasingly uncertain path for the Fed, evolving fiscal policy, and volatile Treasury market backdrop," said J.P. Morgan strategists.

Heavy redemptions and coupon payments this month should help "stabilize" the market, said Barclays strategist Mikhail Foux.

Investors pulled more from municipal bond mutual funds in the final reporting week of 2024, but high-yield reverted to inflows to close out the year, adding to the sector's outperformance overall.