Secondary bond market

"Active ETFs are becoming an integral part of investor portfolios around the world, with financial advisors increasingly incorporating them into their models-based practice," a BlackRock spokesperson said.

"Should September's positive returns hold as we expect, it would mark the fourth consecutive month of positive total returns — the first such period since the five-month period spanning from March through July 2021," BofA strategists Yingchen Li and Ian Rogow said.

While the municipal market barely budged following the Fed's decision to cut rates 50 basis points, Thursday saw muni yields rise up to two basis points, depending on the scale, but still lagged the weakness in USTs. LSEG Lipper reported $716 million of inflows into municipal bond mutual funds.

The product is designed to give SOLVE's customers visibility into "next-trade" pricing data for more than 900,000 munis.

For municipals, Wednesday "marks a crucial step forward, perfectly aligned with the current risk landscape," said James Pruskowski, chief investment officer for 16Rock Asset Management.

Fed rate cuts "should lead to positive price action for both taxable and tax-exempt bonds, and current nominal yields remain well above where they were when the Fed was more dovish, implying generous room to rally from here," said Matt Fabian, a partner at Municipal Market Analytics, Inc.

Despite the underperformance to USTs, munis saw positive momentum during the first two weeks of September with the asset class returning 0.68% so far this month and 1.99% year-to-date.

While supply falls next week as investors await their first Fed rate cut in four years, it should pick up after the FOMC, Barclays PLC said, adding the 30-day visible pipeline "is at relatively manageable levels at the moment." Bond Buyer 30-day visible supply is at $10.09 billion.

Municipal bond mutual funds saw inflows as investors added $1.258 billion to funds — the second-largest inflow figure year-to-date after $1.413 billion of inflows for the week ending Jan. 31.

The August consumer price index showed inflation remains above the Federal Reserve's target level and makes a 50-basis-point rate cut next week unlikely, economists said. Further, many expect the market will be disappointed going forward, as future cuts will likely be shallower than expected.

Municipals lagged the UST moves again, cheapening ratios and creating a valuable entry point for investors looking for compelling taxable equivalent yields, particularly 10-years and out.

"Despite the underperformance of tax-exempt yields last week, we could see some more pressure on both spreads and ratios due to the heavy supply calendar," said Vikram Rai, head of municipal markets strategy at Wells Fargo.

Municipal supply continues to grow as Bond Buyer 30-day visible supply sits at $20.02 billion and the municipal market will see one of the largest weeks of new-issuance at an estimated $13.35 billion, led by three billion-plus deals from Washington, D.C. ($1.6 billion), the New York City Transitional Finance Authority ($1.5 billion) and Illinois ($1 billion).

Ciraolo, who spent more than 17 years at Goldman Sachs, has been brought on as a senior vice president in corporate and municipal short-term securities to help expand SWS' taxable muni franchise through commercial paper trading.

Municipal bond mutual funds saw inflows as investors added $956 million to funds after $1.047 billion of inflows the week prior, according to LSEG Lipper.

Most weeks in September are expected to see around $10 billion of issuance, which could easily grow if a prepaid gas deal is thrown into the mix, said Jason Appleson, head of municipal bonds at PGIM Fixed Income. Bond Buyer 30-day visible supply sits at $16.46 billion.

Summer redemption season has ended, and "without the huge amounts of maturing and called bond principal flowing back to investors, demand in the last months of the year will be more reliant on new money coming into the market than it was in June, July and August," said Pat Luby, head of municipal strategy at CreditSights.

Investors will see more than $7.8 billion of supply to start off September, following a record issuance month in August. The calendar is led by the North Texas Tollway Authority's $1.126 billion of system revenue refunding bonds while high-grade Massachusetts leads the competitive slate with $850 million of exempt and taxable general obligation bonds.

The muni market is "well-positioned for strategic opportunities, with strong inflows driven by the current narrative and eased secondary selling pressure," said James Pruskowski, chief investment officer at 16Rock Asset Management.

The Investment Company Institute reported more than $1.3 billion of inflows into muni mutual funds. The last time inflows topped $1 billion, per ICI data, was for the week ending Feb. 7. LSEG Lipper has reported weeks with $1 billion plus inflows on July 31 and May 8.