Primary bond market

Findings from The Bond Buyer's 2026 Predictions report predict funding crises in these market sectors will be a top worry for municipal finance pros.

Some states and local governments "went on spending sprees" with pandemic funds and "got ratings upgrades that didn't have a lot to do with fiscal management," said an investor.

With front-end rates off so much Thursday morning, "liquidity providers backed off noticeably in the morning in terms of bid with offers slow to follow," said Matt Smith, founder and CEO of Spline Data, noting it was likely a response to elevated bids wanted counts, along with rates.

Illinois returns to market with about $1.4 billion of GO bonds on Tuesday, with proceeds funding accelerated pension benefit payments and capital projects.

The deal includes a current refunding of general obligation bonds issued in 2016 and a tender offer for bonds that have not yet reached their call date.

Currently, it's a Goldilocks market, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital: "Just right enough for just enough people, and steady [enough] that there doesn't seem to be any [big] price pressure at the moment."

There is a lot of money out there, and investors seem comfortable putting it to work.

Minnesota Community Energy priced $803 million of prepaid gas bonds after a delay driven by volatility from the Iran war.

"A lot of the perception is the Iran situation and energy and everything else is temporary, so if municipal yields are higher, let's take advantage of it," said Pat Luby, head of municipal strategy at CreditSights.

If "we get another day of this, that will help the markets continue to trade in a better place," said Jock Wright, an underwriter at Raymond James.

The HOME deal is being priced through the Philadelphia Redevelopment Authority, but carries ratings on par with the city's issuer ratings.

"We're still seeing continued yield pressure out there from the market outlook investors have with the conflict in Iran," said Ajay Thomas, head of public finance at FHN Financial.

The market is navigating volatility driven by geopolitical issues, which has led to trouble for certain deals.

The March/April period is typically a softer period for the muni market, said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory.

The Texas city's bond issue will mostly refinance short-term commercial paper into long-term debt and refund some callable Series 2015 bonds.

Chicago postponed the sale of about $292 million of tax-exempt bonds from an $800 million general obligation bond deal.

"There was a certain amount of resilience munis had in the last week, comfortable enough with distribution," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital Markets. "But the 10-year Treasury backing up behind 4.20%, it proved to be the catalyst for adjusted bid-sides."

This week, "look for deals to get priced to attract demand," said Pat Luby, head of municipal strategy at CreditSights, and Wilson Lees, an analyst at the firm.

A detailed plan for issuing the bonds, which will be backed by an extension of a 1% special sales tax, is expected by May 15.

Many muni participants stayed on the sidelines to start last week due to "the sudden about-face in the Treasury market and uncertainty over how long-lasting the incursion would be," Birch Creek strategists said.