Primary bond market

"Tight underwriting spreads in 2023 followed, for the most part, a well-entrenched trajectory that has backdropped the primary municipal market for years, and so the negligible bump in spreads does not come as a surprise," said Jeff Lipton, managing director of credit research at Oppenheimer.

"With supply still low, and fund outflows just marginal, it is not clear what would substantially cheapen the market, and we could get stuck in the current range for some time time," Barclays strategists said.

Municipal bond mutual funds saw the second week of outflows, with LSEG Lipper reporting $142.2 million of outflows for the week ending Wednesday. High-yield funds saw inflows.

The Chicago Park District Board of Commissioners unanimously approved three ordinances laying the groundwork for up to $37 million new money bonds and a tender.

Despite losses, munis are still outperforming USTs and corporates on a month-to-date and year-to-date basis, noted Cooper Howard, a fixed-income strategist at Charles Schwab.

The consumer price index number further complicates market expectations of Fed rate cuts and muni investors may want "to keep their powder dry" until they have a better idea of the Fed's timing, said CreditSights' Pat Luby.

The muni market will see "continued strength," said Wesly Pate, senior portfolio manager at Income Research + Management, largely due to a a dearth of new-issue supply.

"Even though it is hard to see the market falling out of bed and underperforming in the near term, we are more cautious going into March," Barclays PLC said in a report.

Municipals were steady to improved in spots in secondary trading as another day of sizable new-issues were well-received in the primary market.

The SIFMA Swap Index fell to 3.24% Wednesday, down 50 basis points from 3.74% from the week prior, and 131 basis points from 4.55% it hit on Jan. 24 as swings continued in the VRDO market. Tax-exempt money market funds reversed course to see inflows of almost $4 billion.