Secondary bond market

Municipals followed U.S. Treasuries firmer after markets reacted to the Moody's downgrade of several mid-sized U.S. banks. New issues saw good demand and repriced to lower yields as a result.

While triple-As were little changed the past two sessions, some damage was done last week, leaving market participants generally less optimistic for the final weeks of August.

Late summer is "rarely a good time for our asset class," Barclays strategists said, noting the municipal investment grade index lost money in August three years in a row, and 2023 seems to follow this trend.

Municipal bond mutual fund saw outflows return with Refinitiv Lipper reporting investors pulling $989.852 billion from funds for the week ending Wednesday, led by ETFs and long-end funds.

J.P. Morgan held a one-day retail order for $1.65 billion of revenue bonds from the Dormitory Authority of the State of New York, while Minnesota sold $1.02 billion of GOs in the competitive market in five deals.

This week kicks off a flip of calendar to the final month of the summer reinvestment season and one of the larger new-issue calendars of the year.

For the coming week, investors will be greeted with a larger new-issue calendar led by large New York and Texas ISD issuers, along with gilt-edged Minnesota selling competitively.

Municipal bond mutual fund saw inflows with Refinitiv Lipper on Thursday reporting investors added $552.219 million to funds for the week ending Wednesday following $1.040 billion of outflows the previous week.

The Investment Company Institute reported investors added $453 million to municipal bond mutual funds in the week ending July 19, after $111 million of inflows the previous week.

The offered side "has continued to pack the primary market with value to manage their (and the market's) potential downside if disruption did occur; this also helps the context for muni buyers headed into the Fed," said Matt Fabian, partner at Municipal Market Analytics.