Investment funds

Following Wednesday's selloff, muni yields were cut even further, with yields rising up to six basis points, depending on the scale. Meanwhile, UST yields rose two basis points out long.

The slowdown of growth in the fourth quarter does not imply there is dwindling demand for munis, said Pat Luby, head of municipal strategy at CreditSights.

The case related to an attorney the firm used as a consultant in negotiations related to Puerto Rico's debt restructuring.

While UST yields rose up to five basis points out long Thursday, the current rally "that has taken the 30-year UST closer to where the 10-year yield traded a week ago has not impacted the same range in munis," said Kim Olsan, senior fixed income portfolio manager at NewSquare.

Investors added $546.3 million to municipal bond mutual funds in the week ending Wednesday, following $238.5 million of inflows the prior week, according to LSEG Lipper data.

Investors added $238.5 million to municipal bond mutual funds in the week ending Wednesday, following $1.124 billion of inflows the prior week, according to LSEG Lipper data.

Muni yields were bumped one to eight basis points, depending on the scale, while UST yields fell three to 10 basis points, with the greatest gains out long.

Investors added $2.028 billion to municipal bond mutual funds in the week ending Wednesday, following $251.7 million of outflows the prior week, according to LSEG Lipper data.

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.

While municipals have outperformed USTs on the whole in 2024, they will close December with losses. How taxables perform in early 2025 coupled with macroeconomic and Washington policy uncertainty have municipal market participants on edge for what lies ahead.

While Friday's muni session was muted, the damage of a volatile UST market, paired with low new-issue supply and year-end positioning, has weighed on the asset class in December.