Primary bond market

Municipals outperformed the move in taxables Friday but weakness hangs over the market as fund flows lessen and supply increases. Taxable munis may be keeping exempt rates from moving higher.

For 31 consecutive weeks investors put cash into municipal bond mutual funds but saw just $36.87 million of inflows in the latest reporting period while high-yield funds saw $460 million of outflows after $103 million of outflows a week prior.

ICI reported $704 million of inflows, a $1.1 billion drop from the week prior, bringing the total to $76 billion year to date.

The lion's share of the deal is taxable, with a $20 million tax-exempt new money series; proceeds from the taxables will refund outstanding debt.

The increase in yields and spread widening across municipal sectors has given some pause to high-yield investors after months of stagnation.

A nonprofit that funds charter schools for low-income students is set to price a $233.5 million of revenue bonds Wednesday.

Smaller issuers like rural hospitals and charities are often blocked from issuing bank-qualified debt under current rules, which would change under a reconciliation bill provision.

Challenges abound in meeting the needs of both investors and issuers in incorporating environmental, social and governance factors into the municipal market. Jasper Cox, Fixed Income Analyst at the PRI, Principles for Responsible Investment, gives insights into how the market can adapt. Lynne Funk hosts. (23 minutes)

A law protecting the firearms industry from "discrimination" has made the top underwriters hesitant to do bond business in the state.

Municipals took a breather Monday, largely ignoring stock market volatility and softer U.S. Treasuries, ahead of a solid $9 billion new-issue week.

The finance team expects the mixed taxable and tax-exempt deal will attract ESG-minded investors.

Ratios have moved into a higher, more favorable range, especially in the belly of the curve. The municipal calendar is building, led by taxables and refundings, after they dropped significantly in September.

The lower inflows and high-yield outflows can be tied to the correction over the past week and may point to uncertainty from retail investors over broader market volatility.

September issuance was down more than 32% from the same month in 2020; total issuance so far this year is at $346.48 billion, down 2.4% compared to last year.

With a lot of cash still needing to be put to work, the Investment Company Institute showed another large week of inflows at $1.814 billion.

Municipals have not tracked directly with the UST moves, where the 10- and 30-year UST has risen 24 and 26 basis points, respectively, from Wednesday. Municipals have seen yields rise by 16 and 11 basis points.

The district follows up on a taxable refunding with some new money and refunding as the ink dries on pension legislation that removes the threat of insolvency.

Chris Johns and JT Thompson, portfolio managers at the Aquila Group of Funds talk about the possible return of a BABs-like program and if it’s good or bad news for the tax-exempt bond market. They also discuss infrastructure, tax-exempt advance refundings and monetary policy. (21 minutes)

The high-grade muni scales saw cuts of up to four basis points in a continued selloff Monday as the market faces a robust slate of new issues.

Month-to-date returns for municipals are in the red with the Bloomberg Fixed Income Indices municipal index returning -0.12%, high-yield at -0.15% and taxables at -0.32%.