Secondary bond market

Investors will be greeted Monday with a new-issue calendar estimated at $4.098 billion.

An improving tone was apparent in the municipal market midweek — after a topsy-turvy ride last week when the market saw a close to 50-basis point adjustment to the front end of the triple-A municipal yield curve.

Earlier in the pandemic, bond values showed a greater divergence among local government issuers tracked, but that has reverted to pre-pandemic levels, although work-from-home and other uncertainties still take a toll.

Inflows continued with the Investment Company Institute reporting investors added $931 million to mutual funds in the week ending Feb. 15, after $2.194 billion of inflows the previous week.

"The close to 50 bp adjustment to the front end of the AAA municipal curve, taken at face value, appears to be a huge step toward pricing normalization for tax-exempts," said Eric Kazatsky, head of municipal strategy at Bloomberg Intelligence.

Investors will be greeted Monday with a new-issue calendar estimated at $3.603 billion.

Refinitiv Lipper reported $68.054 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $775.006 million of inflows the week prior.

Inflows continued with the Investment Company Institute reporting investors added $2.194 billion to mutual funds in the week ending Feb. 8, after $1.471 billion of inflows the previous week.

"Markets were expecting (hoping, praying) to get further confirmation that a peak is in and the decline is at least steady, if not accelerating," said Jan Szilagyi, CEO and co-founder of Toggle AI.

February municipal bond activity compared to last month is brisk yet more finicky in the face of an ongoing supply shortage, according to Jeff Lipton, head of municipal credit and market strategy and municipal capital markets at Oppenheimer & Co.