Primary bond market

Total volume for the month was $30.599 billion in 577 issues, down from $40.423 billion in 900 issues a year earlier. Total issuance year-to-date is at $107.626 billion, falling 25.2% from the same period of 2022.

Outflows from municipal bond mutual funds receded as Refinitiv Lipper reported $92.055 million was pulled from them as of Wednesday after $2.876 billion of outflows the week prior. 

"Tenders are another tool in the toolbox, that depending on the situation and market dynamics, can be used to generate robust savings," Aaron Heintz said.

The Investment Company Institute reported investors pulled $377 million from to mutual funds in the week ending April 12, after $229 million of inflows the previous week.

"What are our options? You either pick these banks or you don't. If you don't, business shuts down. We stop building infrastructure," said state Treasurer John Schroder, the bond commission chair.

One underwriter called it a "violent inversion," given that the short end of the municipal and Treasury yield curves were so dislocated.

While the system took a hit during the COVID-19 pandemic, total traffic hit 94% of pre-pandemic levels in 2022. Traffic for the first two months of 2023 was 99% of levels in the same period of 2019.

The "weakness in the secondary market will carry over into this week, which may lead to higher yields and wider spreads in the primary market," said CreditSights strategists Pat Luby and Sam Berzok.

Except for the riskiest sectors, high-yield credit fundamentals appear to be strong, but rising interest rates and fund outflows are dampening primary and secondary market activity.

Investors will be greeted Monday with a new-issue calendar estimated at $7.208 billion, led by $1.3 billion of GOs from bellwether Washington.