Securitization

Rates, ratios and credit spreads have munis entering May on solid footing, though some pressures due to tax season and rising U.S. Treasuries remain.

Refinitiv Lipper reported another week of inflows at $1.64 billion, with $630 million headed into to high-yield. Benchmark yields rose as much as four basis points following weaker U.S. Treasuries, resistance to ultra-low yields.

The municipal market largely ignored the FOMC news that it would hold rates steady. New Jersey was 20 times oversubscribed and ICI reported $2.5 billion of inflows into long-term municipal bond mutual funds.

Data released Tuesday show an improving economy, which continues to stoke fears of impending inflation. Muni investors await New Jersey's $1.57 billion transportation deal.

Jim Robinson, portfolio manager of the Robinson Tax Advantaged Income Fund at Liberty Street Advisors, talks about the changing ways investors should view stocks and bonds. Within the municipal bond market, closed-end municipal bond funds may represent a particularly attractive opportunity. Robinson notes that at a time when the cost of leverage is falling, discounts on closed-end funds are high. Lynne Funk hosts. (18 minutes)

The dearth of supply will likely hold down rates and keep certain investors out of the muni market. High-yield municipal bonds, still the most in-demand sector, tightened again.

Refinitiv Lipper reported $1.889 billion of inflows, with $641 million in high-yield. Negotiated deals repriced to lower yields while competitive loan yields were compelling from New Jersey and Los Angeles USD.

High-grade scales were little changed as ICI reports the sixth week in a row of inflows to the tune of $2.29 billion into municipal bond mutual funds.

Municipal triple-A benchmarks held steady as the focus was on the primary in which large new issues repriced to lower yields while secondary trading was light.

The municipal market was steady Monday as the investors gear up for three separate billion-dollar deals heading to market from California, New York, and Connecticut issuers.

Sub-1% 10-year municipals and low ratios may test investor appetite for the asset class but it is hard to ignore the strong fundamentals and substantial fund flows in the backdrop.

Four out of the six economic indicators released on Thursday surpassed expectations, with consumers tapping their savings to quench pent-up demand. U.S. Treasuries made gains but municipals stood on their own in an impressive two-day rally with insatiable demand.

The economy grew faster from late February through early April while consumer spending increased, with a possible rise in inflation in the near term, according to the Federal Reserve’s Beige Book released on Wednesday.

One-year municipal debt has fallen to record lows with benchmark yield curves at 0.05% and the 10-year muni has fallen below 1% while 30-year muni benchmark yields at or less than 10-year UST.

Rating agency moves on credits across the spectrum are pushing spread-tightening in munis, but the broader economy is still two years away from pre-pandemic levels, according to Federal Reserve Bank of Boston President Eric Rosengren.

Ratios aren't budging as municipal to UST outperformance is not abating. The three largest deals of the week will be taxable, increasing the demand component for exempt paper.

High-yield inflows return to the tune of $821 million. The 10-year triple-A hovers just above 1%.

The Investment Company Institute reported another week of inflows, $800-plus million, as participants focus on that part of the market as an indicator of how munis will fare during tax season.

The theme of low supply, positive inflows and the anticipation of higher tax rates led triple-A benchmarks firmer by one to two basis points.

The services sector showed improvement and employment made big gains in March, but economists note the labor market remains far from full employment.