Secondary bond market

A reversal of fund flows and the arrival of the economic aid for states and local governments helped boost the market's morale ahead of $10 billion in new-issues supply this week.

The junk-rated school district won an upgrade and saw its secondary bond market spreads narrow as it expects to pocket about $1.8 billion in new aid.

Inflows return, stimulus set, new deals on fire — the municipal market reaped all the benefits. Initial jobless claims dropped more than expected in the week, as reopening continued slowly, but the total remains higher than any week before the COVID crisis hit.

The Investment Company Institute reported outflows from municipal bond mutual funds but inflows into exchange-traded funds. The February consumer price index came in as expected, while the core was below expectations, and analysts expect bigger rises ahead.

Despite the recent outflows and volatility of the Treasury market, municipal bonds have and should continue to outperform as stimulus from Washington provides some respite.

With the reset in yields in the rear view, valuations — especially relative to Treasury — will likely support continued robust demand.

Refinitiv Lipper reported $600 million of outflows from municipal bond mutual funds as the market correction caught up. High-yield funds lost a massive $722 million after $330 million a week prior.

A year after COVID disrupted the markets, Sylvia Yeh and Scott Diamond, co-heads of fixed income at Goldman Sachs Asset Management discuss their strategies for 2021 and the important role of retail, consider the new regime in Washington, and contemplate where ESG fits into their portfolio as the muni market incorporates the burgeoning investor interest in it. Lynne Funk hosts (35 minutes)

The Beige Book suggests the economy is recovering, with optimism for 6-12 months ahead, while economists don't envision inflation rising enough for the Fed to take action any time soon.

Institutional pricing of New York City and competitive deals from Baltimore and Cambridge, Mass., should help give a sense of where yields are heading, while Ohio offers up GOs for a market that's been little changed for three days after a large sell-off.