Primary bond market

The upgrades brought the Orange County Transportation Authority managed lanes toll credit to double-A levels across the board.

The Investment Company Institute reported investors added $16 million to municipal bond mutual funds in the week ending June 14, after $495 million of inflows the previous week.

Due to the Fed meeting-induced lighter new-issue calendar last week, and a holiday-shortened week this week, Birch Creek strategists said, "buyers had no qualms about putting cash to work."

Market participants agree issuance will not hit the highs seen in 2020 and 2021, but they are split on whether issuance will surpass the $384.086 billion of debt issued in 2022.

Investors will be greeted with a new-issue calendar estimated at $5.031 billion led by several New York issues.

Those "holding out for wider yields or relative value" are frustrated due to an extremely tight muni range, but FHN Financial's Kim Olsan said, "the reality is that supply has yet to materialize to force that change."

Munis did not follow USTs yet, "but given the outperformance of munis over the last couple days and while I wouldn't be surprised if they weaken a little given how expensive ratios are," said Breckinridge's Matt Buscone.

The Louisiana Stadium and Exposition District is selling bonds to continue renovations on the Caesars Superdome, which will host the 2025 Super Bowl.

While "munis are set up for better performance, perhaps modest single-digit returns, the near-term outlook for fund flows will make for a challenging read," Oppenheimer's Jeff Lipton said.

Matthew Gastall and Daryl Helsing of Morgan Stanley delve into how municipals are performing versus other asset classes, where taxable munis fit and how they see the market performing heading into the summer reinvest. Jessica Lerner hosts. (36 minutes)

Elevated new issues, Federal Deposit Insurance Corp. sale lists, and heavy reinvestment cash "helped to offset each other [last] week and keep the muni market stable," said Birch Creek strategists.

Federal Reserve data shows that retail ownership of municipals rose $58.8 billion, or 3.7% quarter-over-quarter, to $1.67 trillion. Bank ownership fell in the first quarter by $13.3 billion.

Municipals have continued outperforming, "building on the trend that started in late May," Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel said.

City finance officials report that its recent $1.56 billion general obligation bond sale was more than six times oversubcribed.

"How fund flows end up shaping up this week is going to be very meaningful for how we start the summer," said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.

The Investment Company Institute reported investors pulled another $374 million out of municipal bond mutual funds in the week ending May 31, after $671 million of outflows the previous week

"June started out fairly strong for the municipal market as the relative cheapness attracted investors looking for an opening to start buying bonds at higher yields," said Roberto Roffo, managing director and portfolio manager at SWBC Investment Company.

The Housing Development Corp. will come to market with almost $1 billion of sustainable development bonds to fund new housing projects in the city.

The system is incorporating some floating-rate risk into its fixed-rate debt portfolio to allow for strategic flexibility after its new hospital campus opens.

Last week, munis underperformed the Treasury market "across the curve through Thursday with yields lower just 13bps," according to Birch Creek strategists. However, they said Friday's rally "in the front end helped pull shorter maturity munis ahead."