Secondary bond market

As ridership remains low, investors are closely watching for new funding streams and credits like the MTA's planned congestion tax-backed bonds.

Despite fixed-income seeing losses this month, Jeff Lipton, managing director of credit research at Oppenheimer, believes "a performance sea change is nearing."

After the year-end rally, "2024 bond investors have been reluctant buyers, prices creeping lower perhaps until the data and the Fed's next steps are more clear," said Matt Fabian, partner at Municipal Market Analytics.

This week's heavy new-issue calendar of tax-exempt supply "could lead to a modest cheapening of ratios," said Vikram Rai, head of municipal markets strategy at Wells Fargo.

Growing new-issue supply is "adding to bidders' 'wait-and-see' mentality with a variety of credits coming to market at favorable spreads," said FHN Financial's Kim Olsan. Next week's calendar hits $8.4 billion.

Muni yields rose up to eight basis points, depending on the scale, while UST yields rose up to six basis points at 30 years.

The Investment Company Institute Wednesday reported large inflows into municipal bond mutual funds, with investors adding $2.066 billion to funds, while exchange-traded funds saw $1.082 billion of outflows for the week ending Jan. 10.

Munis have "struggled to get out of starting gate" to start 2024 as munis are returning negative 0.24% so far this year, said Jason Wong, vice president of municipals at AmeriVet Securities.

The tax-exempt market could also see pressure due to "heavy issuance, anemic flows, and rate volatility," according to Barclays PLC.

The top two municipal bond insurers wrapped $31.845 billion in 2023, up 10.4% from the $28.847 billion of deals in 2022, according to Refinitiv data.

The December consumer price index came in slightly stronger than expected, perhaps eliminating the possibility of a rate cut in March, analysts said.

There were several ways Adaje could integrate ficc.ai's offerings into its system, the most impactful would be tender offering analyses, said Dan Silva, Adaje CEO.

The one-year was cut up to eight basis points, depending on the scale.

The offered curve is "still deeply overbought" at all maturities outside of one year, which is "a signal for issuers and sellers to become aggressive," said Matt Fabian, a partner at Municipal Market Analytics.

Since November, 10-year munis have fallen 130 basis points, according to Refinitiv MMD. This has pushed ratios to near-record lows, said Jason Wong, vice president of municipals at AmeriVet Securities.

Despite the outperformance this week, and while the asset class had "a stellar December, which rounded out a very solid year," Barclays PLC strategists said the high-grade muni market has become "quite rich."

The muni market enters this year from a relative position of strength, said Jeff Lipton, managing director and head of municipal research and strategy at Oppenheimer.

This year has favorable potential for 1Q activity, noting an unusually large scheduled reinvestment potential in January and February, including $19 billion of maturities plus calls in January and $24.9 billion in February, noted MMA's Matt Fabian.

"Buyers went all in on revenue-sector names, with that category earning 6.8% and beating out GOs by 127 basis points," said FHN Financial's Kim Olsan. "Sub-sectors within the revenue category pointed to a risk-on theme into year-end." 

This performance is a dramatic rebound from 2022's losses.