Secondary bond market

With the Federal Open Market Committee meeting this week and the next week shortened by the bond market observance of Veterans Day, CreditSights strategists said "investors should be prepared for two weeks of subdued new issuance."

The upcoming Federal Open Market Committee meeting on Tuesday and Wednesday has led to a lighter new-issue calendar with $2.72 billion on tap.

Municipal to UST ratios have risen this week with the 10-year approaching 90% and the 30-year topping 100%.

Outflows continued as investors pulled $3.876 billion from mutual funds in the week ending Oct. 19 after $4.532 billion of outflows the previous week, according to the Investment Company Institute.

While muni performance has turned negative for October, "the asset class is significantly outperforming UST," said Jeff Lipton, managing director of credit research at Oppenheimer Inc.

"Municipal market performance has improved, but the bumpy road continues as investors remain uncertain about the interest rate environment," said Nuveen's Head of Municipals John Miller.

Selling pressure was on the rise again this week. Thursday's $2.919 billion of bonds out for the bid was only surpassed on March 19, 2020, when they hit $4.115 billion. A larger calendar closes out October.

"The curve slope has undergone a massive flattening this year and recent trends suggest demand pockets are developing in specific ranges," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Outflows continued as investors pulled $4.532 billion from mutual funds in the week ending Oct. 12 after $5.172 billion of outflows the previous week, according to the Investment Company Institute.

Triple-A curves were a touch firmer in spots as secondary trading took a backseat to the larger primary activity with Connecticut and Massachusetts pricing general obligation bonds, a large CommonSpirit healthcare and several competitive issues led by Rhode Island GOs.

Volume rebounds eightfold this week with a new-issue calendar of $8.5 billion, including several billion-dollar deals.

"Despite a pick-up in volatility in the rates market, municipals have been performing relatively well in October," according to Barclays PLC.

Refinitiv Lipper reported $2.262 billion of outflows from municipal bond mutual funds for the week ending Wednesday after $2.057 billion the week prior.

The Investment Company Institute reported $5.128 billion of outflows for the week ending Oct. 5 after $5.374 billion of outflows the previous week.

Munis are in the black so far in October and some participants see signs of continued improvement.

While October is typically a busy issuance month, 2022 is not shaping up to be as more issuers are sidelined by volatility. The primary market will see another light calendar in the holiday-shortened week.

U.S. Treasuries saw more losses and municipal to UST ratios fell on the day's moves with the long bond valuation below 100%.

Bids wanteds are on the rise, but a constructive secondary market showed a steady to firmer market in the past two sessions. ICI's latest outflows figure is the highest since June.

Triple-A yields fell four to 10 basis points across the curve amid robust secondary trading with high-grade names showing clear moves to lower yields.

Munis open October firmer, underperforming a UST rally, but September closed out the month with 3.84% losses — the single largest monthly loss since September 2008.