Secondary bond market

The Investment Company Institute reported investors added $453 million to municipal bond mutual funds in the week ending July 19, after $111 million of inflows the previous week.

The offered side "has continued to pack the primary market with value to manage their (and the market's) potential downside if disruption did occur; this also helps the context for muni buyers headed into the Fed," said Matt Fabian, partner at Municipal Market Analytics.

"Longer-dated bonds look attractive, as investors are locking in long-term rates before the expected decline in 2024," while "a tremendous amount of money is also invested in the short end of the curve," Nuveen strategists said.

Washington will bring $1.1 billion of GOs in four competitive sales Tuesday, leading a new-issue calendar estimated at $5.439 billion.

Municipal bond mutual fund saw inflows with Refinitiv Lipper reporting investors added $1.040 billion to funds for the week ending Wednesday following $136.174 million of outflows the previous week.

The Investment Company Institute reported investors added $111 million to municipal bond mutual funds in the week ending July 12, after $ 23 million of outflows the previous week.

The bond division undertook two transactions last week to retire outstanding taxable public education capital outlay and state revolving fund bonds. The transactions used $200 million in program funds, along with additional money, to pay down $400 million in state debt.

The back half of July is starting "much like the front half with ongoing UST volatility and municipal supply staying in the forefront," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Long-duration and shorter-coupon munis saw ample demand last week. Investors, believing rates will fall as early as the first part of next year, continue to lock in long-bond yields, Nuveen strategists said.

Bond Buyer 30-day visible supply climbs to $13.42 billion while the new-issue calendar is led by a $1 billion-plus New York City Transitional Finance Authority future tax-secured subordinate deal.

Proceeds from the sale will be used to fund infrastructure projects in the city's $164.8 billion 10-year capital plan.

Municipal bond mutual fund outflows continued as Refinitiv Lipper reported investors pulled $136.174 million from the funds for the week ending Wednesday following $855.719 million of outflows the week prior.

"The bond market finally got the relief from inflation it was hoping for," said Bryce Doty, senior vice president and senior portfolio manager at Sit Investment Associates. 

With the third quarter officially under way, municipal bond experts say the tax-exempt market is poised for better performance and stronger market technicals ahead in the second half.

Nick Venditti of Allspring Global Investments talks about evolving demand components, compelling yields and expectations for second half performance. Jessica Lerner hosts. (24 minutes)

This week should see a return to more normal supply, which might be a little higher than average for the year so far, said Daniel Solender, partner and director of tax-free fixed income at Lord Abbett & Co.

For the coming week, investors will be greeted with a new-issue calendar estimated at $7.282 billion.

Municipal bond mutual fund outflows intensified as Refinitiv Lipper reported investors pulled $855.719 million from the funds for the week ending Wednesday following $25.331 million of outflows the week prior.

The Investment Company Institute reported investors pulled $136 million from municipal bond mutual funds in the week ending June 28, after $338 million of inflows the previous week.

"Lower volumes, lighter primary issuance, and heavier reinvestment cash flows are likely going to contribute to a continued bout of muni relative performance," said Birch Creek Capital strategists.