Secondary bond market

Analysts are taking the view that muni investors expect higher taxes and are brushing off inflation concerns. U.S. Treasuries are another story.

The Investment Company Institute reported another week of inflows, but at a lower clip than recent weeks with $541 million coming into municipal bond mutual funds.

The new-issue market came alive with two high-grade competitive loans and the speculative-grade Pacific territory pricing bonds to strong demand.

The state's high court justices could resolve legal questions raised in a lawsuit that argues `$14 billion of outstanding GOs are invalid.

Price indexes in the latest New York manufacturing survey came in higher than expected, furthering inflation concerns.

After facing outside economic data pressures and rising U.S. Treasuries, municipals ended the week on solid footing ahead of a larger calendar with newly upgraded Connecticut leading with $1 billion of exempt and taxable GOs.

Refinitiv Lipper reported $750 million of inflows into municipal bond mutual funds for the week ending May 12 while high-yield funds saw $487 million of inflows.

While the pressure was on municipal yields, which rose two to four basis points, the Investment Company Institute reported another week of inflows, with $928 million coming into municipal bond mutual funds and another $285 million into ETFs.

First quarter FDIC data show a $10.75 billion-plus jump in U.S. banks’ net purchases of municipal securities, the eighth biggest quarter since 2003, MMA says.

Tighter spreads and richer ratios are likely to continue, particularly as looming tax increases amplify the value of the tax-exemption, but analysts are hesitant to predict how much lower rates can go before investors balk.