Securitization

The tax-exempt muni market has performed "exceptionally well" so far this week, outperforming USTs, said J.P. Morgan strategists led by Peter DeGroot.

Robust issuance this year has contributed to muni underperformance relative to other asset classes, but it also has "improved after-tax relative value for investors in higher tax brackets," said Sam Weitzman of Western Asset.

The muni market is dealing with elevated supply this week and secondary flows have "reacted in tandem," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

This movement comes on the heels of muni yields remaining relatively unchanged throughout November.

The muni market recorded its fourth straight month of positive returns in November and December is likely to keep the streak going with another strong month to round out the year.

Preliminary November issuance figures are at $37.054 billion, up 45.5% year-over-year, according to LSEG.

"Dealer inventories have grown heavier throughout [November], which could put pressure on the market if supply reverts to its weekly average of over $10 billion," said Chris Brigati, CIO and managing director of SWBC, and Ryan Riffe, SVP of capital markets at the firm.

"We do not expect any major weakness to take hold as the new issue calendar is beginning to dwindle with only two non-holiday or non-Federal Reserve weeks left in the year," said Birch Creek strategists.

Bonds have traded up since the company last week announced a tentative bondholder deal and project update and financing details.

The new-issue calendar falls to an estimated $1.154 billion, with $939.1 million negotiated deals on tap and $214.8 million of competitives.

The deal would give the company time to seek additional equity, debt and federal funds.

The long-awaited jobs report paints a mixed picture for market participants: nonfarm payrolls increased by a greater-than-expected119,000 in September, but the unemployment rate rose to 4.4%.

The market is in a bit of a lull right now as it braces for a deluge of economic data, which could spark volatility, said Jeff Timlin, a partner at Sage Advisory.

The muni market has "demonstrated more conviction with steady demand and appealing relative yields weighing on the long-end while shifting dynamics on the short-end have led to municipals selling-off," said Tim Iltz, fixed income credit and market analyst at HJ Sims.

The "data dumps" over the next several weeks could lead to market volatility, said Abdulla Begai, director and fixed income portfolio management at A&M Private Wealth Partners.

Issuance year-to-date is at $505.245, just shy of 2024's record of $507.585 billion, with $11.109 billion of supply on the calendar for the week of Nov. 17.

For munis, the end of the shutdown helps steady the backdrop, said James Pruskowski, an investor and market strategist.

"Continuing yield stability ... suggests a comfortable market that, even with the shutdown apparently close to ending, may resist/lag potential price/yield changes in taxables," said Matt Fabian, president of Municipal Market Analytics.

Some of the most active sectors have been education (+29%), GOs (+17%) and healthcare (+17%), said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

Assured Guaranty commented on Brightline and PREPA during its third-quarter earnings call, on which the company reported a 46% increase in third quarter gross par written year over year, to $7.85 billion from $5.38 billion.