Primary bond market

The Texas Transportation Finance Corp deal will refund interim notes used to finance the ending of a public-private partnership that built toll lanes.

Last week, the muni market saw a "slowdown in activity" after the asset class saw its best monthly performance in nearly two years, said Birch Creek strategists.

The Texas Transportation Finance Corp. leads the new-issue calendar with $1.739 billion of subordinate tier toll revenue and refunding bonds, followed by New York City with $1.5 billion of general obligation bonds.

"While the shutdown will eventually be resolved, present circumstances may catalyze tactical investment opportunities as a way to capture even more compelling yield and income opportunities," said Jeff Lipton, municipal market intelligence analyst for The Bond Buyer.

If the shutdown lingers, disruption to key economic data releases could increase market uncertainty, said Tom Kozlik of HilltopSecurities.

October has historically not been "particularly kind to the municipal market, as it tends to be one of the heavier supply months of the year," said Daryl Clements, a portfolio manager at AllianceBernstein.

The muni market may be shaken by a government shutdown, driving short-term volatility and wider spreads, said James Pruskowski, a public finance strategist.

Muni yields rose up to eight basis points, depending on the scale, with the largest losses again on the front-end of the curve.

The short-end correction has been "driven by a solid labor market report, which pushed Treasury yields higher as expectations for additional Fed rate cuts tempered," said Alice Cheng, director of municipal credit and investor strategy at Janney.

Retail offerings from California and Connecticut led the market Wednesday.

Secondary selling pressure and the larger calendar weighed on the market Tuesday.

"On a month-to-date basis, AAA munis have outperformed Treasuries across the entire curve. … This outperformance can be attributable to an improvement in market technicals," said Daryl Clements, a portfolio manager at AllianceBernstein.

Munis have outperformed USTs and corporates by more than 1.0% month-to-date on the heels of this rally so far, BofA strategists said.

Munis saw cuts, albeit small ones, for the first time in nearly two weeks as yields rose up to four basis points, depending on the scale.

The East Baton Rouge Sewerage Commission plans to achieve savings by refunding taxable bonds with tax-exempts.

By the close, muni yields were bumped up to four basis points, depending on the curve, while UST yields rose two to five basis points.

As the "slope of the municipal yield curve remains extremely steep and long bonds are cheap relative to U.S. Treasuries," Daryl Clements, a portfolio manager at AllianceBernstein, predicts "long municipal bonds have a long way to go until they are considered fair value."

Minnesota plans to go to market Sept. 23 with a $1.27 billion general obligation bond sale.

"This was a much-needed rally as the long end struggled throughout the year, but now has been pushed back into positive territory," said Jason Wong, vice president of municipals at AmeriVet Securities.

The authority's borrowing apparatus is maintaining a business-as-usual approach it embarks on a massive new capital program and fends off federal cuts.