Primary bond market

Muni yields were bumped two to 12 basis points, depending on the scale, with the largest gains out long, and UST yields fell six to nine basis points, pushing the two-year UST to its lowest levels in over two years.

The rally stemmed from the weak nonfarm payrolls report and revisions brought down the three-month average to 29,000 jobs per month, further solidifying the chance of a rate cut in September, said Chris Brigati, managing director and CIO at SWBC.

Investors added $672.3 million to municipal bond mutual funds in the week ended Wednesday, following $590.4 million of inflows the prior week, according to LSEG Lipper data.

"We are expecting a lot of interest in the offering next week," said Geoff Urbina, managing director, KeyBanc Capital Markets Public Finance.

Looking solely at internal factors, "the municipal market itself is still doing well, reasonably via the temporary drop in new issue supply amid a more lasting reduction in reinvestment flows," said Matt Fabian, a partner at Municipal Market Analytics.

Thanks to strong technicals and the anticipated interest rate cut by the Federal Reserve at its September meeting, municipal bonds posted positive returns of 0.87% in August, reversing their losses of 0.20% in July, according to Jason Wong, vice president municipals at AmeriVet Securities.

Issuance for the week of Sept. 2 is at an estimated $7.457 billion, with $6.179 billion of negotiated deals and $1.278 billion of competitive deals on tap, according to LSEG.

With the break in issuance this week, the market has firmed a bit, said Tim McGregor, managing partner at Riverbend Capital Advisors.

Paul Chatalas, director of capital markets for the state, said the six series of bonds drew "aggressive bids."

While issuance has been on a record pace this year, this week sees a slight slowdown in activity, caused by participants going on vacation, said Jeff Timlin, a partner at Sage Advisory.

In a 2-1 vote, county commissioners approved an Oct. 8 competitive general obligation bond sale to keep funding a jail project amid escalating costs.

While issuance is up year-over-year, weeks like this can be difficult to find the right deals, said Whitney Fitts, director of municipal portfolio management at Appleton Partners.

Proceeds of the sale are expected to fund the purchase of the non-gambling businesses at Genting Group's Resorts World Catskills in Sullivan County.

"We expect subdued activity again [this] week heading into the Labor Day holiday," Birch Creek strategists said.

The relative rarity of the credit was compounded by their source of funds, the deal's size, and bond ratings slightly lower than New York state and city. 

Munis underperformed a UST rally, which had everything to do with Powell's speech at the Jackson Hole symposium and future Fed action, said Cooper Howard, a fixed income strategist at Charles Schwab.

The University of Chicago went to market this week, as the Trump administration has targeted higher education and faculty criticize budget and program cuts.

A possible explanation is that the massive inflows into mutual funds are a parallel move to large inflows into the Capital Group Municipal High-Income ETF, which saw the biggest inflow of a ETF on Friday at $1.5 billion, said Pat Luby, head of municipal strategy at CreditSights.

RBC Capital Markets will be the underwriter for the bonds, which will have a maximum maturity of 40 years.

Hastedt says the city plans two bond sales this fall.