Primary bond market

This week again sees elevated supply, as issuance sits at $9.673 billion, with Tuesday being a very busy day.

The Texas Water Development Board expects to sell up to $1.8 billion of tax-exempt and taxable bonds in September.

The initial reaction was a little bit a flight-to-quality trade in rates, which is supportive of USTs and munis as safe-haven assets do well during times of uncertainty, said Chris Brigati, senior vice president and director of strategic planning and fixed income research at SWBC.

Encompassing roughly 270,000 acres, or about 420 square miles, the mixed-use property owned by the publicly traded Tejon Ranch Co. has long been at the center of a debate over wildfires and urban sprawl.

The new-issue calendar is at $9.7 billion the week, led by the Texas Transportation Commission with $1.7 billion of first-tier and second-tier revenue refunding bonds.

The sale reflects the strength and demand of New York state paper.

Municipal bond mutual funds saw inflows as investors added $891.4 million to funds after $775.3 million of inflows the week prior, according to LSEG Lipper.

Single party control of a state eases perception of bond default risk associated with laws like Chapter 9, a study found.

Issuance has remained robust over the past two weeks, with Wednesday being a particularly busy day.

Volume is predicted to continue at "robust levels," possibly through the fourth quarter, said Matt Fabian, a partner at Municipal Market Analytics.

The $238.8 million of voter-approved debt will end a 12-year drought in new money general obligation issuance by the nation's fifth largest city.

Financial markets are trying to "absorb" the outcome of higher odds of Trump winning in November, said James Pruskowski, chief investment officer at 16Rock Asset Management.

While the market awaits the initial FDTA proposal, some wonder if the rulemaking will be affected by the upcoming presidential election and the U.S. Supreme Court's Chevron decision.

Cabarrus County planned to use most of the proceeds to pay off a bond anticipation note.

In the summer, the market will largely move "sideways" and underperform late in the third quarter to early in the fourth quarter, "while possibly recouping most of its losses late in the year depending on the outcome of November elections," said Barclays strategists.

"Bond yields are plunging [Thursday] as rate cut expectations soar following this morning's consumer price index release, which depicted the first month of deflation since July 2022," noted José Torres, senior economist at Interactive Brokers.

Large-scale issuers, including state-level transportation authorities, counties and sales tax entities, have "planned volume to coincide with implied demand," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

A revenue bond issue for Galveston Wharves will price Tuesday after Hurricane Beryl interrupted port operations earlier this week.

Overall, demand is "high," an ongoing tailwind for munis, along with solid fundamentals, Nuveen strategists said.

S&P Global Ratings revised the outlook on the city's AA rating to negative from stable, citing increased debt and costs from a settlement with firefighters.