Primary bond market

Municipals triple-A benchmarks continue the trend of ignoring other markets to start 2022. The new year will likely usher in slower growth and continued inflationary pressures, analysts said.

Municipal volume is estimated at $1.13 billion for the opening week of 2022. Persistently strong net supply challenges will bias credit spreads tighter, credit discipline weaker in the next few years, analysts say.

2022 volume projections are clouded by many uncertainties. What is not murky is that demand for municipals is unlikely to fade.

A HilltopSecurities survey found skilled nursing and senior living as the sectors they were most concerned about for 2022.

Investors will also receive $139 billion of interest payments in 2022, about $593 million more than in 2021, according to a report from CreditSights.

Until supply comes, market participants appear to be content to sit back and let the calendar flip to a new year without making any big moves.

Municipals are sitting out the ups and downs in equities and UST, with $12 million scheduled for the primary in the final week of 2021.

Tax risks continue to linger as they are preserved as a potential offset for whatever level of spending all 50 Democratic senators can agree to, but potential approval of the legislation remains a question mark.

The Build Back Better in its current form essentially has been killed by Sen. Joe Manchin, likely limiting the potential for tax hikes in the coming year.

Municipal volume is estimated at a lean $558.8 million with $494.7 million of negotiated deals and $64.2 million on the competitive slate. Thirty-day visible supply is at $3.17 billion.

Despite outside pressures, municipal fundamentals are strong with improving credit pictures, issuers flush with federal cash and the ongoing supply-demand imbalance.

It marked the 40th straight week of positive flows into the long-term funds and brought the total inflows for this year near $82 billion. Exchanged-traded funds saw $168M of inflows.

Triple-A yield curves were unchanged on the day and mostly have not budged but a basis point in spots since the end of November.

Coming off last week's $19.5 million influx of weekly new issues, supply this week is lower as the market watches the Federal Open Market Committee meeting.

There are $8.127 billion of negotiated deals on tap and a mere $367.4 million of competitive loans slated, none over $100 million. Thirty-day visible supply totals $9.9 billion and net negative supply is at $8.4 billion.

Chicago's captured a new low in recent history on tax-exempt spreads but the taxables, which were downsized by $500 million, faced a tougher road amid Treasury volatility.

State officials will wrap up a busy year a sale that includes a social bonds component.

Municipal yield curves were little changed for the seventh straight session while Refinitiv Lipper reported the 40th week of inflows into municipal bond mutual funds, with high-yield seeing a large increase week over week.

"The vast majority of muni issuers are trying to do the right thing,” Zehner said. “The vast majority of underwriters and municipal advisors are trying to do the right thing.”

The Investment Company Institute reported $289 million of inflows into municipal bond mutual funds in the week ending Dec. 1, down from $965 million in the previous week.