Secondary bond market

Investors will be greeted Tuesday with a decrease in supply with the new-issue calendar estimated at $2.691 billion in $1.786 billion of negotiated deals and $904.9 million of competitive loans.

Municipals improved for the fifth session in a row with 10- and 30-year triple-A yields falling 30 basis points since Thursday. Connecticut priced $1 billion-plus of GOs and saw yields lowered in a repricing.

Several major technicals are beginning to improve in the muni market, said Burt Mulford, portfolio co-manager of fixed and strategic income at Eagle Asset Management.

Fixed-income markets have had a tough 2022 but municipal bonds have been among the ones that have struggled the most.

Given the volatility of risk assets is likely to remain high, and the focus on the flight to safety increases, all fixed-income assets could benefit as a result, including municipals, Barclays strategists say.

Refinitiv Lipper reported $2.712 billion of outflows, bringing the total outflows so far in 2022 to $65.8 billion, surpassing the last largest annual outflows of $63.5 billion during the Taper Tantrum in 2013.

Investors pulled $7.270 billion from muni bond mutual funds in the week ending May 11, per ICI data, while exchange-traded funds saw $1.756 billion of inflows, the fourth week of record inflows.

On the buy-side, weakness, outflows, supply issues, and poor liquidity are making life challenging for municipal bond investors. The same could be said for issuers.

While only 12% to 15% of municipal bond trading volume is performed electronically, various market participants say the time to embrace new technologies is now.

Deep-in-the-red municipal returns are not helping assuage investor concerns, creating a negative feedback loop that has yet to see a pause.