Primary bond market

Competitive deals are slated to total about $2.9 billion, near the highest for any week this year, said J.P. Morgan strategists.

In a year characterized by a rise in mega deals, the agency looks to address an advancing financial "cliff."

The new-issue calendar rises to $9.175 billion next week, with $6.089 billion of negotiated deals coming to market and $3.086 billion of competitive deals on tap.

The issuance is expected to generate strong interest in D.C., Virginia, and Maryland.

"The forces of municipal fundamental and technical measures are setting up a reconciliation against higher UST yields," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

July will see $35.2 billion of redemptions, down 13% month-over-month but still 35% higher than 2024's monthly average of $27 billion, said Pat Luby, head of municipal strategy at CreditSights.

"With a nonexistent new-issue calendar and heavy dealer balance sheets, we expect the muni market to get a bit 'grabby' over the next few weeks," AllianceBernstein strategists said.

"While valuations are still historically tight, the extra demand through the summer should help support the muni market in the coming weeks," Birch Creek strategists said.

In a week that culminated in headline-grabbing events — a presidential debate, several Supreme Court decisions, more macroeconomic data to add to Fed policy expectations — municipals closed on a quiet note and in the black for June.

Municipal bond mutual funds saw outflows as investors pulled $498 million from funds after $16 million of inflows the week prior, according to LSEG Lipper. High-yield funds still saw inflows.

June supply appears to be finishing above $45 billion, the third highest monthly total in the last 10 years, said Kim Olsan, vice president of municipal bond trading at FHN Financial.

In 2024, variable rate (short put) issuance is up 6.4% increase year-over-year, LSEG data shows. Few expect issuance to return pre-financial crisis levels.

Convention centers in Chicago, Cincinnati and St. Louis are being upgraded, although cost increases after the pandemic added challenges to some financings.

Demand for the increased supply has been "solid" if nearly largely reliant on income-oriented small lot buyers, noted Municipal Market Analytics, Inc. Partner Matt Fabian. Through last week, buyers continued to be separately managed account/retail in size.

Finance officials for the city decided to be the first municipal issuer to use the distributed ledger technology for a $10 million deal, banking on cost savings, better liquidity and more access for retail investors to their bonds. Mayor Tom Koch, CFO Eric Mason and Strategic Asset Manager Rick Coscia say it should be the first of many deals for the industry.

Total volume currently stands at $224.13 billion, up 38.5% from $161.848 billion at this time last year. As the end of the first half approaches, several firms are revisiting their supply projections for the year, given the growth so far this year.

With the "pretty good run" month-to-date, it would not be unexpected to see "the market take a breather, and with a large calendar this coming week, it may again move sideways," said AllianceBernstein strategists in a weekly report.

"It is hard to be overly excited about current valuations of tax-exempts relative to Treasuries; however, at tax-adjusted yields (using individual tax brackets), munis look quite attractive compared with other asset classes," noted Barclays PLC.

Municipal bond mutual funds saw small inflows as investors added $16.4 million to the funds after $154.4 million of inflows the week prior, according to LSEG Lipper.

The state's new law requires companies like investment banks to provide written verification of their positions, part of a trend among similar bills aimed at preventing Wall Street banks from lying about their positions, said a firearms industry lobbyist.