Secondary bond market

"The bond market marked down the odds of rate cuts after the release," said FHN Financial Chief Economist Chris Low. "The fact long yields are still lower than two days ago suggests traders are skeptical of the quality of the employment data but are confident the Fed will use it as a reason to keep rates steady," he said.

The price drops follow a lawsuit filed Friday by bondholders alleging the mall's owners colluded with the city of East Rutherford to lower the property assessment.

Tuesday was a particularly heavy day of supply at an estimated $7.5 billion, per J.P. Morgan strategists.

This week's expected elevated $12.6 billion in supply" "coincides with a recent uptick in secondary offerings … and may skim some froth from the market, particularly where spreads have hit one-year tights," said J.P. Morgan strategists led by Peter DeGroot.

The downgrade reflects ongoing underperformance in ridership and revenues relative to Kroll's expectations.

The new-issue calendar is led by Washington with $1.3 billion of GOs selling by competitive bid in three series.

Munis enter this year with "strong credit fundamentals, elevated tax-equivalent yields, and a steeper curve that supports duration extension," said James Welch, municipal portfolio manager at Principal Asset Management.

Yields have seen "intermittent volatility from broader macro and geopolitical crosscurrents, keeping sentiment cautious despite relatively muted headline moves," said James Pruskowski, managing director at Hennion & Walsh.

Supply should be "well-received, given strong inflows and the increase in reinvestment capital for the new month," said Chris Brigati, managing director and CIO at SWBC, and Ryan Riffe, senior vice president of capital markets at the firm.

The market is well-positioned for February, after January's near-record tax-exempt supply, said J.P. Morgan strategists led by Peter DeGroot.

Munis were largely unchanged this week and tax-exempts continue to be "quite unattractive" at current levels, said Barclays strategists led by Mikhail Foux.

Over the past five years, January has seen a relatively stable market tone, said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory.

"Markets are reading this as a strategic pause, not a policy shift," said Gina Bolvin, president of Bolvin Wealth Management Group.

The muni market has rebounded from the technical pressures of the first half of last year — a result of surging issuance — said John Miller, head and CIO of First Eagle's municipal credit team.

Chicago general obligation bond prices have dropped sharply since the start of the year, according to the Center for Municipal Finance's muni indices.

Munis were steady Monday following the large cuts the asset class saw last week, specifically on Tuesday, Jan. 20.

Munis were the best-performing U.S. fixed-income asset class through the first three weeks of January, but the strong performance has created some problems, Barclays strategists said.

"Of all these headlines, there's no direct concern for the muni market or municipal issuers. It's just tangential concerns of what this does for the economy and rates," said Brad Libby, fixed income credit analyst at Wellington Management and a fixed income portfolio manager with Hartford Funds.

Current events and financial developments outside of the muni sector mean that investors should hold off buying munis until rates correct, said Matt Fabian, president of Municipal Market Analytics.

The rates market is "on edge" as global fiscal and geopolitical pressures collide, said James Pruskowski, managing director at Hennion & Walsh.