Secondary bond market

The fundamentals of the muni market have investors stuck in a low-rate environment without much of an alternative. Refinitiv Lipper reported $1.466 billion of inflows into municipal bond mutual funds with $813.8 million into high-yield.

A reported preliminary 25.8% drop in May issuance shows how strong fund inflows, improving credit and the reopening of governments are keeping the muni market issuer friendly.

Triple-A municipal benchmark yield curves were bumped one to two basis points, lagging a four basis point rally in U.S. Treasuries after weaker consumer sentiment and dovish comments from Fed officials moved equities lower.

Municipals saw little activity on Monday as the market prepped for the bulk of the week's $7B primary calendar arriving Tuesday and Wednesday.

Strong technicals have been the theme, and with federal aid and better-than-expected tax receipts coming in, issuers are not tapping the market as much as investors would hope.

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.

A disappointing jobs report gives credence to the Federal Reserve’s concern about slack in the labor market.

Refinitiv Lipper reported $584 million of inflows, $341 million of which went to high-yield, as investors pull back on reinvesting to pay tax bills with the May 17 tax filing deadline looming.

Pennsylvania's competitive GO deal saw its yields fall further from recent trading while the North Texas Tollway Authority benefited from positive credit news on the transportation sector and repriced 25 basis points lower. ICI reported another round of $2-billion-plus inflows.

After just one session, the 10-year muni is back below 1% with ICE Data Services and Refinitiv MMD at 0.99% while Bloomberg BVAL is at 0.96% and IHS Markit at 0.95%.

Inflationary pressures remain high while the manufacturing sector continues to deal with supply chain woes that hold it back, analysts said.