Primary bond market

Municipal outperformance to UST ended Tuesday as triple-A yields rose 12 to 20 basis points as several new issues began pricing.

Illinois' $2.45 billion GO sale should attract a wider investor audience with the higher ratings as the state seeks to raise new money for capital projects, fund ongoing pension buyout programs, and refund some debt for present value savings.

Neal Pandozzi, a partner at the law firm of Bowditch & Dewey, talks with Chip Barnett about what environmental social and governance really means for public finance, separating politics from policy, polemics from principles. (34 minutes)

Muni yields were cut four to eight basis points, depending on the scale, while UST yields rose seven to nine basis points. Muni outperformance and rich ratios continue.

For long-term muni bonds, BofA strategists noted that macro market and supply/demand conditions "are dominating the picture, pushing the high-grade muni market to a relatively rich valuation versus Treasuries."

For the week ending Wednesday, outflows intensified as Refinitiv Lipper reported $255.794 million was pulled from municipal bond mutual funds after $91.713 million of outflows the week prior. High-yield saw inflows.

The Southern California Public Power Authority plans to price $700 million in revenue bonds for improvements to a 488-mile power transmission system.

Strong demand in the primary market is leading to the oversubscription of many new issues. Municipals and USTs were better again as macroeconomic concerns pressure equities.

The upgrades add to the city's ratings upswing across credits that Mayor-elect Brandon Johnson will inherit from Mayor Lori Lightfoot.

The second half of 2023 may see a slowdown, perhaps even a mild recession, said Daniel Close, the newly named head of municipals at Nuveen.

Municipals are coming off a rally and yields were better in spots Monday, but ratios are a cause for pause.

The Local Government Commission voted to allow the Greater Asheville Regional Airport Authority to sell $175 million of transportation revenue bonds.

For the week ending Wednesday, outflows lessened as Refinitiv Lipper reported $91.713 million was pulled from municipal bond mutual funds after $194.097 million of outflows the week prior.

Outflows continued with the Investment Company Institute reporting investors pulled $128 million from mutual funds in the week ending March 29, after $693 million of outflows the previous week.

Outside of economic data, "a light forward calendar is driving strong demand in the secondary market and with new issues, with some deals being significantly oversubscribed," SWBC's Roberto Roffo said.

For four consecutive weeks, triple-A yields have fallen, and munis returned over 2.2% for the month, "a great reversal from February where munis returned a loss of 2.26%," said AmeriVet Securities' Jason Wong.

"Folks are aware of possible pressure that could weigh on the market, but attitudes are still generally more constructive than negative at this time," says Tom Kozlik of HilltopSecurities. 

Outflows continued as Refinitiv Lipper reported $194.097 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $427.082 million of outflows the week prior.

The Irvine Facilities Finance Authority will price $455 million in special tax bonds to develop the Great Park in the Orange County, California, city.

Outflows continued, with the Investment Company Institute reporting investors pulled $693 million from mutual funds in the week ending March 22, after $684 million of outflows the previous week.