Secondary bond market

High-yield municipal bond funds saw inflows of $534.1 million compared to $300.6 million compared the previous week, per LSEG Lipper data.

Technicals could "break down" if there is a potential decline in risk assets or rising unemployment, particularly in white-collar jobs, said Jeff Timlin, a managing partner at Sage Advisory.

Muni investors hope "any move toward higher yields is steady, even dignified, such that it doesn't catalyze an outflow cycle that would countervail year-to-date total returns just before we close out the year," said Vikram Rai, head of municipal strategy at Wells Fargo.

Munis ended November in the black with the asset class seeing gains of 1.73% for the month, pushing year-to-date returns to 2.55%.

With an estimated $13 billion calendar on tap, demand for paper will be bolstered by the $16 billion of redemptions coming Monday while mutual fund inflows, this week at about $560 million and concentrated in the long-end, signal solid investor support. Munis are returning 1.73% in November as of Friday.

The Investment Company Institute reported $1.221 billion of inflows into municipal bond mutual funds for the week ending Nov. 20. Exchange-traded funds saw inflows of $836 million.

November's total is below the 10-year average of $32.278 billion and is the lowest monthly total this year. The year's total is about $25 billion short of $500 billion.

"Earlier this month, Chair [Jerome] Powell noted that there was no 'hurry' to cut rates," noted BMO Senior Economist Priscilla Thiagamoorthy. The minutes, she noted, "confirm a broad support for taking a more cautious approach in easing monetary policy."

Markets could see that "the risks of higher inflation and interest rates are implicit constraints on the Trump policy agenda, with the eventual policy outcomes potentially less inflationary than some investors previously feared," UBS strategists noted.

Supply has "declined materially, allowing dealers to take a breather, with their inventories dropping significantly, while retail investors do not seem to be spooked by rate volatility, lower taxes and possible threats to the tax-exempts, and continued putting money into tax-exempts at a brisk pace," said Mikhail Foux, managing director and head municipal research and strategy at Barclays.