Secondary bond market

Though monetary policy has been in the forefront, at mid-month the tone changed with global inflation outlooks and federal infrastructure and social package in flux.

A lighter, $5 billion calendar, heavy on healthcare, kicks off November. Most participants agree volatility in U.S. Treasuries will be a leading factor for municipal market performance. Uncertainty in Washington also isn't helping the asset class.

Amid a flattening municipal yield curve and inversion of the Treasury market, new issues fared better than the secondary on Thursday as participants prepared for month end.

ICI reported the lowest inflows since outflows in March, while exchanged-traded funds saw an uptick.

As of now, returns for the month will very likely end in the red. The Bloomberg U.S. Municipal Index is at -0.40% for the month and +0.39% for the year.

Despite a short-end U.S. Treasury rally, municipals face pressure on the one- and two-year as participants look to month-end positioning.

Volume falls slightly in the week of October 25 with total potential volume estimated at $7.408 billion: $6.036 billion of negotiated deals and $1.372 billion in the competitive market.

Municipal bond mutual fund inflows fell to $177 million while high-yield is back to outflows, both signaling selling may be moving the market toward another larger correction.

The Investment Company Institute reported $385 million of inflows while ETFs fell to $124 million.

Spreads have been widening, but secondary trading was on the light side and triple-A benchmarks were cut by only a basis point in spots even as U.S. Treasury yields once again rose on the 10- and 30-year.