Securitization

While UST yields "consolidate" following Friday's massive rally after the July jobs report, muni yields remain resilient, according to Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

The municipal bond market is "doing pretty good for the moment," said Jeff Timlin, a managing partner at Sage Advisory.

The risk Brightline Florida poses to the rest of the high-yield market may manifest in fund flows, investors said.

Over the past three trading sessions, MMD yields have been bumped nine to 12 basis points, while UST yields have fallen over 20 basis points on the front of the curve.

Some bondholders have retained legal counsel while others are in the dark about the company's plans.

"If the narrative takes hold that the Fed is behind the eight ball and will need to cut rates several times in the coming months to catch up to the realities of a weaker economy, we expect muni yields will drift lower alongside treasuries," Birch Creek strategists said.

Municipal yields fell four to seven basis points, depending on the curve, while UST yields rallied nine to 30 basis points, with the largest gains on the front end.

Tax-exempt munis have underperformed year-to-date, said David Hammer, a managing director and portfolio manager at PIMCO.

The FOMC held rates steady at the conclusion of its meeting Wednesday and offered no hints regarding a September move.

The muni market has "cheapened and steepened," which is a great opportunity for people still on the sidelines to get into the market again, said Jennifer Johnston, director of municipal bonds research at Franklin Templeton.