Primary bond market

Investors will be greeted Monday with a new-issue calendar estimated at $6.018 billion with a few bellwether, triple-A names coming from Loudoun County, Virginia, Frederick County, Maryland, and Columbia University with sizable deals.

Banks reduced their quarterly muni holdings during the first quarter at the fastest rate in 20 years, per Municipal Market Analytics.

"Our ratings reflect the progress the city has made over time on important issues like rebuilding reserves and improving the health of our pension fund," said Philadelphia Treasurer Jackie Dunn.

Outflows were seen again from municipal bond mutual funds, though they lessened this week as Refinitiv Lipper reported $101.664 million was pulled as of Wednesday.  

The CPI numbers coming in pretty much as expected "was a relief" to the markets, with the bond market rallying after the release, said Luke Bartholomew, senior economist at abrdn.

Despite the attraction for new issues, sources said there is still uncertainty overall in the municipal market stemming from the regional banking crisis.

Now that there is more "clarity from the Fed on the path of interest rates, both investors and issuers may start to move off the sidelines," said Daniel Close, head of municipals at Nuveen.

Investors will be greeted Monday with a new-issue calendar estimated at $7.588 billion.

"The SLGS window closed after we released the pre-marketing wire and had already signed off on the cashflows," which assumed the use of SLGS, city Auditor Megan Kilgore said. "I've had the SLGS window close the same week, even within a day or two of pricing, but not without any advance notice."

The secondary was quiet and the sole deal of size came from a $400 million-plus competitive water and sewer loan from Portland, Oregon. The recent rise in yields makes for more compelling levels.

"The market is expecting a 25 basis point rise in the Fed funds rate, but more importantly, investors are waiting for the comments for a better idea of what to expect going forward," said SWBC Investment Company's Roberto Roffo.

In a supply-challenged market, foreign investors can play a role in buying taxable munis. 16Rock Asset Management's James Pruskowski discusses a 2023 reset in the muni market. Lynne Funk hosts (29 minutes)

Municipals were in the red to close out April, down 0.2%, per the Bloomberg Municipal Index, but are in the black 2.5% year-to-date.

The city is offering more than $1 billion of debt under its higher-rated Sales Tax Securitization Corp., and its water and wastewater revenue credits.

"Investors' jitters in the lead up to next week's Fed meeting resulted in some large macro market moves and a rise in volatility," noted BofA Securities strategists in a weekly report.

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.