Secondary bond market

Tech stocks suffered on "worries that Beijing is becoming increasingly competitive in the high-stakes artificial intelligence race," said José Torres, senior economist at Interactive Brokers.

Issuance for next week falls to an estimated $5.151 billion, with $3.959 billion of negotiated deals and $1.193 billion of competitive deals on tap.

Investors added $2.028 billion to municipal bond mutual funds in the week ending Wednesday, following $251.7 million of outflows the prior week, according to LSEG Lipper data.

Issuance was led by a $2 billion retail pricing from the University of California in the negotiated market and a $1.2 billion competitive deal from Washington.

Underperforming since the calendar turned, "munis have continued to cheapen over the past three weeks as Treasury returns are about flat for the year while munis are down 0.31%," said Jason Wong, vice president of municipals at AmeriVet Securities.

The Regents of the University of California leads the negotiated calendar with $2 billion of general revenue refunding bonds.

Munis "responded in part to a better UST session [Wednesday] but weren't in a position from a supply standpoint to attempt to match the 10-15 basis point rally in taxables," said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.

Municipals are underperforming USTs month-to-date, with the Bloomberg Municipal Index showing losses of 1.02% versus 0.92% for USTs as of Tuesday, but both are outperforming losses in corporates that are seeing 1.23% losses in January.

"Even though it will be priced to sell, such large supply in one week may be a struggle for the asset class," said Anders S. Persson, Nuveen's chief investment officer for global fixed income, and Daniel J. Close, Nuveen's head of municipals.

The muni market also faces an elevated new-issue calendar, which may put additional pressure on muni yields. Bond Buyer 30-day visible supply sits at $17.57 billion.