Secondary bond market

The new-issue calendar is $5.45 billion while 30-day visible supply sits at $11.14 billion. The largest deal of the week comes from the New York City Municipal Water Finance Authority with $793.83 million.

Investors yanked $1.154 billion out of municipal bond mutual funds in the latest week, Refinitiv Lipper reported.

The Investment Company Institute on Wednesday reported $3.120 billion of outflows in the week ending Feb. 16, up from $993 million of outflows in the previous week.

Between the long holiday weekend and investors trying to absorb the Russia-Ukraine developments, it was a slow start to the week in the municipal market.

Municipals have been resilient throughout the pandemic — with the help of federal aid — keeping the Golden Age for public finance alive.

The new-issue calendar for the holiday-shortened week is $4.98 billion, with $3.633 billion of negotiated deals and $1.347 billion of competitive loans.

Refinitiv Lipper reported outflows after inflows of $216 million the previous week.

Rates could go up faster than they did in 2015 if predictions for the economy hold, minutes from the FOMC said, but the release offered no hints as to whether a 50 basis point liftoff would be considered.

Municipal bonds' relative value has increased dramatically as rates have risen and credit fundamentals have improved, with municipal-to-Treasury ratios now on par with their five-year averages.

Inflation remains under market scrutiny, with Monday’s data suggesting consumers expect price pressures to cool later this year.

Municipal yields rose up to 10 basis points on the short end, playing catch up to the volatility of Treasuries' moves on Thursday. Rising UST rates will inevitably be more significant for munis until they settle into more stable levels.

Refinitiv Lipper reported the first inflows into municipal bond mutual funds at $216 million after three weeks of large outflows while high-yield saw small outflows. Exchange-traded funds reported $755 million of inflows.

Markets were somewhat comforted by Federal Reserve Bank of Atlanta President Raphael Bostic’s comments suggesting the Fed will not be as aggressive as the markets suspect.

The state of Washington sold $743 million of general obligation bonds in the competitive market at similar spreads to its November sale while some issuers have moved to the day-to-day calendar.

Washington will bring $742 million of general obligation bonds in competitive sales Tuesday, providing guidance for triple-A benchmark yields.

Municipal to UST ratios hit highs earlier in the week, creating entry points for buyers to return to the market even as ratios fell on the week. The primary will see a smaller calendar at $5.4 billion.

Municipals were stronger again on the day, though, and new-issues were repriced to lower yields.

Buyers appeared to return to the market the past two sessions after the January correction moved yields and ratios higher. Secondary trading was up again on Wednesday and new deals were well-received.

Triple-A benchmark curves were bumped two to five basis points outside of five years as markets calmed to start February.

Market volatility has led to munis seeing the worst performance to start the year since 2018 and the biggest monthly losses since March 2020.