Secondary bond market

Monday's massive selloff contributed to investors pulling more out from the mutual fund complex. Exchange-traded funds saw $1 billion of outflows and high-yield investors yanked out $1.7 billion.

The 75 basis point hike, prompted partly by hotter-than-expected inflation data, is the largest since 1994.

Triple-A yield curves rose five to eight basis points. Volatility somewhat eased Tuesday as investors took pause ahead of the Federal Open Market Committee meeting.

The 25-basis-point move to higher yields is the largest one-day change in triple-As since March 2020 when COVID began roiling markets. Munis could not ignore a continued selloff in UST led by inflation and recession concerns.

Ahead of the FOMC meeting, municipal issuers pull back. Investors will be greeted Monday $2.880 billion of new-issue supply.

Refinitiv Lipper reported $2.094 billion of outflows, reversing the $1.216 billion of inflows from the mutual fund complex.

Hardy Manges brings three decades of experience in municipal trading to the national, full-service investment bank, brokerage and advisory firm.

The Investment Company Institute reported investors added $1.090 billion from muni bond mutual funds in the week ending June 1, up from $4.367 billion of outflows in the previous week.

Positive momentum and supply scarcity are themes for the near future, which should bode well for the market.

The selloff in Treasuries and the continued strength of municipals have done their part to richen muni-UST ratios.

Investors will be greeted Monday with an increase in supply with the new-issue calendar estimated at $6.488 billion, led by $1 billion-plus of GOs from Maryland in the competitive market.

The seasonal factors of a supply and demand mismatch, reinvestment needs and strong credit fundamentals, have opened a window of opportunity.

High-yield raked in the majority of the flows helped by Nuveen reopening two of its high-yield funds to new investors. Participants remain cautious as macroeconomic effects still hang over the market.

Municipals posted gains for the first time in 2022 in May, outperforming U.S. Treasuries on the month. The Bloomberg Muni Index posted a 1.49% return in May bringing losses down to 7.47% year to date.

June redemptions will be the highest of the year at $50.6 billion. New-issue supply — 30-day visible is currently at $15.5 billion — is unlikely to keep up.

The rapid swing to lower yields over the past week has led to a sunnier outlook for the summer reinvestment season, but uncertainties on the economic front, rate volatility, and supply questions hang overhead.

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.