Securitization

Municipals are little changed to start the week after last week's selloff, which saw muni yields cut up to 20 basis points out long.

March had been expected to be difficult due to a "combination of heavy supply, low redemptions, rate volatility, tax-related selling and now fund outflows," said Barclays strategists Mikhail Foux and Grace Cen.

A $150 million housing bonds with a taxable component is anticipated for May and $110 million higher education student loan bonds are also anticipated for that month.

After digit-double cuts out long Wednesday, muni yields rose an additional two to four basis points, depending on the curve, on Thursday.

"The supply/demand dynamic is a headwind for the muni market this week as supply is expected to be elevated," said Cooper Howard, a fixed income strategist at Charles Schwab.

"The ever-shifting narrative regarding President Trump's tariff policies is throwing fuel on the fire of unpredictability," said SWBC's Chris Brigati.

The market rally "took a bit of a breather last week, with yields rising across the curve," said Daryl Clements, a portfolio manager at AllianceBernstein.

"March is not an overly positive month for munis, but a lot will depend on U.S. Treasuries," said Barclays strategist Mikhail Foux.

"Markets fixate on one risk at a time, and there's no shortage right now. Volatility has spiked, liquidity is thin, and buyers are sidelined — but that's temporary," said James Pruskowski, chief investment officer at 16Rock Asset Management.

Issuance remains heavy this week, but while it's elevated, the muni market is "structurally undersupplied," meaning if 2024's record level of $500 billion-plus of issuance was doubled, the market could still digest it quite well, said Wesly Pate, a senior portfolio manager at Income Research + Management.

Short-end U.S. Treasuries rallied mid-morning, while UST yields were little changed out long, but ended the day weaker across most of the curve with the greatest losses out long. Munis were steady throughout the day.

"Apathy and caution" were the theme of the past week, said Birch Creek strategists.

The Trump administration wants to shed federal office space, and bonds backed by those leases are feeling the heat.

New York City leads the negotiated calendar with $1.4 billion of GOs, followed by the Regents of the University of California with $1.2 billion of general revenue bonds.

While UST yields rose up to five basis points out long Thursday, the current rally "that has taken the 30-year UST closer to where the 10-year yield traded a week ago has not impacted the same range in munis," said Kim Olsan, senior fixed income portfolio manager at NewSquare.

It has been a bit of a "heavy start" to the year for issuance, said Jeff Devine, a municipal research analyst at GW&K.

Muni prices continue to "show relative resilience" despite a nearly record pace of issuance, said Matt Fabian, a partner at Municipal Market Analytics.

Last week, "there was no meaningful economic data to digest and yields were slightly lower," said Daryl Clements, a portfolio manager at AllianceBernstein.

Market activity has been somewhat "subdued," and USTs yields have been "relatively well-behaved," though the 10- to 30-year rates have slightly underperformed, moving up three to five basis points, said Barclays strategist Mikhail Foux.

The Trump administration singled out the Las Vegas-Los Angeles bullet train for praise Thursday, the same day the deal priced.