Primary bond market

Supply scarcity is helping the market through the Treasury volatility. Bond Buyer 30-day visible supply currently sits at $4.72 billion.

This week's new-issue supply needs to be "priced to sell to pique investor interest," said noted Nuveen's Daniel Close and Anders S. Persson.

The State Trunk Line Fund deal is the latest to fund the state's $3.5 billion bond authorization for highways. After this deal $700 million remains.

Continued pressure on the UST market coupled with the end of the summer reinvest may begin to test new issues as investors are able to be more selective.

Total volume in the first half of the year was $180.882 billion in 3,853 deals, down 17.1% from the $218.230 billion in 5,444 over the same period in 2022, according to Refinitiv data.

In comparison to the $17.689 billion of transactions completed in the first half of 2022, the top two municipal bond insurers wrapped $15.571 billion in 2023.

"Bearish Treasury moves have kept some pressure on the muni market and prevented an attempt to rally during the summer season when large redemptions trump issuance," BofA Global Research said in a report.

The new California Housing Finance Agency credit pools multifamily housing loans.

New York deals dominated the top ranks of regional issuers in the first half of 2023 even as supply sank around the Northeast and around the country.

Refinitiv Lipper reported $264.046 million of outflows from municipal bond mutual funds for the week ending Wednesday after $278.559 million of inflows the previous week.

Ongoing strikes by actors and writers pose a risk for next year's Oscars ceremony, which generates significant revenue that helps pay off the bonds. 

Municipal CUSIP request volume decreased in July on a year-over-year basis, following an increase in June, according to CUSIP Global Services.

Summer redemption season ends Tuesday when issuers return $9 billion of matured or called bond principal, said CreditSights strategists Pat Luby and Sam Berzok.

"The recent outperformance has valuations nearing stretched levels again," Birch Creek Capital said in a weekly report. "If USTs reverse the recent trend higher, we would not be surprised to see munis lag during the rally."

Another day of mixed inflation data led Treasury yields to rise but munis mostly stayed put after underperforming a UST rally earlier in the week. The market is also focused on the $9 billion of redemption flows coming on Tuesday.

Refinitiv Lipper reported $278.559 million of inflows into municipal bond mutual funds for the week ending Wednesday, led by exchange-traded funds.

New York City's $1 billion deal was re-priced to lower yields and a tax-exempt and taxable deal for the NFL's Tennessee Titans new stadium priced.

Municipals followed U.S. Treasuries firmer after markets reacted to the Moody's downgrade of several mid-sized U.S. banks. New issues saw good demand and repriced to lower yields as a result.

While triple-As were little changed the past two sessions, some damage was done last week, leaving market participants generally less optimistic for the final weeks of August.

Late summer is "rarely a good time for our asset class," Barclays strategists said, noting the municipal investment grade index lost money in August three years in a row, and 2023 seems to follow this trend.