Investment funds

Municipals are outperforming USTs to a large degree this month, with investment grade munis seeing positive 0.81% returns in November and 1.63% year-to-date. USTs are in the red at -0.40% in November with only 0.96% positive returns in 2024.

"This year, with the tax-exemption clearly threatened, primary calendars should (although, of course, might not) be larger, putting a $500 billion full-year supply total in range, with $451 billion already in the books through 46 weeks," said MMA's Matt Fabian.

This month is experiencing similar volatility as 2016 when generic yields traded higher by 50 to 70 basis points during November of that year, said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.

Tax-exempt money market funds reached a 2024 high of assets under management at $136.84 billion for the week ending Wednesday, according to the Investment Company Institute.

Dan Close, Head of Municipals at Nuveen and Margot Kleinman, Director of Research at the firm, joins The Bond Buyer's Lynne Funk to delve into the high-yield market as the New Year — and new rate environment — kick off.

Despite the post-election selloff, inflows continued this week as LSEG Lipper reported investors added $1.263 billion to municipal bond mutual funds for the week ending Wednesday, compared to $658.5 million of inflows the prior week. High-yield inflows returned.

October's "price path has created wider spreads but also brought higher yields that are now in the range where a broader audience may begin to take notice," said NewSquare Capital Senior Fixed Income Portfolio Manager Kim Olsan, noting higher taxable equivalent yields for different tenors of the yield curve.

Municipals largely stayed in their own lane Wednesday, digesting the large slate of new issues as supply dwindles heading into election week, with Bond Buyer 30-day visible supply falling to $5.56 billion.

While fundamentals remain strong — with credit upgrades outpacing downgrades by 3.5 times so far in 2024 — technical factors have been "less supportive," Principal Asset Management strategists said in a report.

"Coming off rich muni-Treasury ratios, the market has swiftly repriced," said 16Rock Asset Management's James Pruskowski. "With now cheaper benchmark yields and wider credit spreads, fresh capital is flowing in, and a strong bottoming opportunity looks to be emerging."