Secondary bond market

With higher yields and ratios, many participants say investors should be taking advantage of current levels.

Supply has weighed on munis to some extent over the past few weeks, as week after week issuance tops $10 billion, said Jeremy Holtz, a portfolio manager at Income Research + Management.

Muni yields were bumped up to eight basis points, depending on the curve, on Tuesday, but for most of last week, U.S. rates sold off on the heels of passed legislation, said Barclays strategists Mikhail Foux and Grace Cen.

"We're seeing some of the additional instability and other things come into play," said Dan Genter, CEO of Genter Capital Management.

"Light demand" for Wednesday's 20-year Treasury bond auction "propelled yields to the nosebleeds and equities to the basement," said José Torres, senior economist at Interactive Brokers.

The "risk to the tax exemption appears to have dropped sharply as of last week ... taking with it the hypothetical risk of a supply surge ahead of any end-date for borrowers' exemption access," said Matt Fabian, a partner at Municipal Market Analytics.

"Munis are no longer moving on headlines; they're reacting to rates and supply," which is playing out again Monday after a choppy March and April, said James Pruskowski, chief investment officer at 16Rock Asset Management.

Municipals were cut up four basis points, depending on the curve, through noon.

Issuance for the week of May 19 is estimated at $11.667 billion.

A couple of "bond-friendly" economic reports released Thursday could encourage the Federal Reserve to reduce interest rates in the near future, some analysts argued.

While April was a challenging month for muni performance, this summer will be a more supportive environment, said Mark Paris, chief investment officer and head of municipals at Invesco.

The muni market is recovering from tariff turmoil, and is more resilient than the day-to-day volatility suggests, Jamie Doffermyre of Truist Securities said.

Even with Monday's U.S.-China tariff truce and Tuesday's inflation print, the market has felt better over the past several weeks, said Jamie Iselin, managing director and head of municipal fixed income at Neuberger Berman.

Munis yields followed UST yields higher Monday, rising one to four basis points, depending on the scale, but the asset class outperformed USTs.

"In our view, the worst for munis is behind us, at least for now; tax-exempts might continue to outperform, but only to a degree as technicals will remain somewhat challenging," Barclays strategists said.

The recent firmness in the market has been "much appreciated," said Shannon Rinehart, senior portfolio manager of municipal debt at Columbia Threadneedle Investments.

The bonds have not reacted to the most recent negative ratings actions, although one buysider said that may soon change.

Muni yields remain attractive, said Tom Kozlik, managing director, head of public policy and municipal strategy at HilltopSecurities.

Most of the Maryland Proton Treatment Center's debt hasn't traded hands for years.

Focus was on the primary market last week, with Birch Creek reporting that one dealer estimated that 90% of the focus earlier in the week was on new issues.