Secondary bond market

"Demand for low-duration tax-exempts has been so strong that short maturity benchmark yields are now lower than the after-tax yields for comparably rated benchmark taxable muni and corporate bonds," said CreditSights strategists Pat Luby and John Ceffalio.

New-issue volume grows to $10.7 billion led by a $2.7 billion taxable Massachusetts ESG deal, $1.35 billion of Oklahoma natural gas taxables, $1.25 billion from the Regents of the University of California and $1.1 billion from New York City.

Pressure on the short end of the muni curve is being exacerbated by a 3.24% two-year Treasury note, from a correction to floating rate notes and dealer positions.

The Investment Company Institute reported investors poured in $1.589 billion into muni bond mutual funds in the week ending August 3, the highest level since November.

Several large new issues priced. Municipal yields were little changed, U.S. Treasuries were weaker on the short end and stocks ended in the red ahead of the much-anticipated July inflation figure.

Weekly supply is holding below $5 billion, reinvestment needs are still in effect from large redemptions and fund flows are leaning more positive, noted FHN Financial's Kim Olsan.

Investors will be greeted Monday with an increase in supply with the new-issue calendar estimated at $5.941 billion, up from total sales of $1.700 billion.

Investors poured $1.094 billion into municipal bond mutual funds in the latest week, versus the $236.491 million of inflows the week prior. It marks only the second time this year inflows eclipsed $1 billion.

The Investment Company Institute reported investors pulled $246 million out of muni bond mutual funds in the week ending July 27 compared to the $602 million of outflows in the previous week.

The large primary was led by two $700-plus million of revenue bonds from the Port of Seattle and the Georgia Ports Authority.

Summer redemption season starts winding down; Net negative supply stands at $18.777 while 30-day visible is at $12-plus billion.

Municipals will end July with positive returns across all sectors. The Bloomberg Municipal Index shows a 2.49% return in July, moving year-to-date losses lower to 6.71%.

Investors added $236.491 million to municipal bond mutual funds, per Refinitiv Lipper data, versus the $698.782 million of outflows the week prior. High-yield saw inflows hit nearly $550 million.

Municipals are poised to end July in the black. Demand for muni product has been strong this summer, with analysts expecting supportive market technicals through August with a likely continuation of positive performance.

Investors sit on the sidelines, waiting to see how much the Fed will hike rates. The consensus appears to be another 75 basis point rate hike, though a full point hike could be on the table.

With the Fed rate decision coming this week, issuers are sitting on the sidelines in both primary and secondary Monday with little changed yield curves.

Munis were firmer to end the week but underperformed U.S. Treasuries.

As passengers return and revenues climb toward pre-pandemic norms, the Port Authority of New York and New Jersey has billions of capital construction on tap at the region's largest airports.

The bank in recent months shuttered its muni proprietary trading unit — which used the firm’s own cash to trade and invest — as part of a push to focus on providing more of its balance sheet to larger, institutional clients, according to people familiar with the matter.

Investors pulled $698.782 million out of municipal bond mutual funds, per Refinitiv Lipper data, versus the $206.127 million of inflows the week prior. High-yield saw small inflows.