Secondary bond market

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.

Triple-A yields rose more than three-quarters of a point on the front end and nearly half a point out long in September as munis posted 3.84% losses.

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In the competitive market Thursday, the New York Urban Development Corp. sold $1.443 billion of tax-exempt personal income tax revenue bonds.

A larger new-issue slate led by large deals from the Texas Water Development Board and state of Illinois took focus away from the secondary.

Elevated secondary selling pressure on Tuesday forced more losses. Triple-A yields rose by as many as seven to eight basis points across the curve, moving the entire triple-A curve above 3% and the 30-year a dozen basis points shy of 4%.

Bids wanteds have been elevated, municipal bond mutual fund outflows large and consistent and the short end of the U.S. Treasury curve continues its march upward, moves that muni investors cannot ignore.

Triple-A yields rose 11 to 15 basis points five years and in.

Retail investors may be moving out of municipal bond mutual funds and into separately managed accounts, largely due to the headline shock of the massive outflows from the funds, participants say.

One-year rates have risen 100 basis points, intermediate maturities have traded up about 25 basis points and long-term munis are nearly 50 basis points above June's close.

Munis were little changed while long UST improved and equities ended in the red after the FOMC raised the fed funds rate target 75bps to a range of 3% to 3.25% and members are leaning toward a rate of 4.4% by yearend.