Securitization

Issuance will "not completely disappear, but will adjust to its seasonal norm from the record-breaking pace of the past several months," said Barclays' Mikhail Foux.

October's "price path has created wider spreads but also brought higher yields that are now in the range where a broader audience may begin to take notice," said NewSquare Capital Senior Fixed Income Portfolio Manager Kim Olsan, noting higher taxable equivalent yields for different tenors of the yield curve.

Municipals largely stayed in their own lane Wednesday, digesting the large slate of new issues as supply dwindles heading into election week, with Bond Buyer 30-day visible supply falling to $5.56 billion.

California sold tax-exempt and taxable GOs, the University of Miami priced a refunding deal while the Harris County-Houston Sports Authority came with a refunding and tender offer.

The key question for municipal market investors is less about who wins the races for the White House and Congress and more about by how much.

While the asset class is still in the red for October, it has pared back earlier losses. The Bloomberg Municipal Index is at negative 1.42% in October and positive 0.84% year to date.

The correction to the municipal market has improved muni to UST ratios while uncertainty hangs over ahead of the election. J.P. Morgan's Peter DeGroot said the firm expects the end of next week "will mark the end of the difficult technical period in 2024 and believe that net supply in November will lead to better valuations broadly in the municipal market."

While fundamentals remain strong — with credit upgrades outpacing downgrades by 3.5 times so far in 2024 — technical factors have been "less supportive," Principal Asset Management strategists said in a report.

"The identity of the marginal buyer may be shifting, and with that the market's valuation of structure and liquidity," said Matt Fabian, a partner at Municipal Market Analytics.

Demand for munis remains "insatiable," said Daryl Clements, a municipal portfolio manager at AllianceBernstein.