Securitization

A volatile U.S. Treasury market and month-end positioning are pressuring municipal yield curves.

John Hallacy, founder of John Hallacy Consulting LLC, talks with Chip Barnett about the pandemic’s lingering credit impacts on state finances in a wide-ranging discussion of the many issues affecting the municipal market today. (17 minutes)

The Federal Reserve must be prepared to move if inflation continues to surprise to the upside, according to one Fed president, while another again stated a desire for the Fed to pull back on its accommodation.

The short end of the yield curve faced pressure from a cheaper UST five-year. As the flattening trend in UST takes hold, demand for duration will also spill over into the tax-exempt space, with long-dated munis continuing to outperform, analysts say.

Refinitiv Lipper's $1.85 billion of inflows say investors aren't going anywhere.

The Investment Company Institute on Wednesday reported $2.533 billion of inflows into municipal bond mutual funds, the highest since February.

If the market holds, the state could also receive the lowest recorded true interest cost in its history of general obligation bond sales.

Tuesday’s data may not be indicative of where the economy is going and will likely be written off by the Federal Open Market Committee at its meeting, analysts say.

Most analysts expect the Federal Open Market Committee will alter its Summary of Economic Projections and perhaps begin to talk about tapering, without offering clues when they'll begin cutting back on asset purchases.

Yields on top-quality munis were flat on the AAA scales Friday; yields were seven to nine basis points lower on the week.

Trading showed firmer prints, with Georgia general obligation bonds, Maryland GOs and Los Angeles Department of Water and Power bonds trading up.

The Investment Company Institute reported $1.089 billion of inflows into municipal bond mutual funds, marking the 13th consecutive week.

The U.S. Treasury 10-year dipped to its lowest yield since March while municipal investors poured money into new deals and secondary trading helped push benchmarks even lower.

The market idled Monday while investors prepare for a $12 billion new-issue onslaught that brings diversity of credits that will help direct benchmark yields. Continued fund flows are needed to sustain current yields.

Muni prices were firm Friday after the employment report showed nonfarm payrolls rose 559,000 in May as the jobless rate fell to 5.8%.

As most participants await Friday's jobs report, the municipal market Thursday sustained a firm tone as rates remained on a gradual path of decline.

ICI's report marks the 12th consecutive week of inflows bringing the total for 2021 to more than $40 billion. Lower- and non-rated deals saw 20 to 30 basis point bumps in repricings as any paper with yield is massively oversubscribed.

The revenue sector winners in May included healthcare with +0.53% gains, transportation with +0.42%, each benefiting from "the reach for yield and improving metrics," analysts said.

Sheila King of Eagle Asset Management talks with Chip Barnett on the growing importance of environmental, social and governance issues for municipal governments. She gives examples of what works and what doesn't and why it matters. (14 minutes)

Municipal yields will likely stay in a narrow range with trading activity subdued unless larger interest rate volatility unexpectedly sets in, analysts say.