Securitization

"This week's new issue calendar should be well received," said Anders S. Persson, Nuveen's chief investment officer for global fixed income, and Daniel J. Close, Nuveen's head of municipals.

This week's $9.4 billion calendar "should easily be absorbed as it is set to be the last full primary calendar of the year, given the Fed meeting the following week and then Christmas and New Year's holidays," Birch Creek Capital strategists said in a weekly report.

Pennsylvania leads the new-issue calendar with $2.1 billion of GOs in four series via the competitive market while the New York City TFA will bring another $1.4 billion of exempts and taxables.

Triple-A yields have fallen up to 95 basis points on the month, supply is up 7.8% year-over-year for November and the month is posting positive returns, which has, in turn, led to well over 3.50% returns year-to-date.

The continued drop in yields has been "buoyed by a broad rate rally and intra-market fundamentals that simply have created more buyers than sellers," noted Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

While the muni market faces some headwinds, such as rich relative yields, near-term returns "are likely to be favorable for munis," said Cooper Howard, a fixed-income strategist at Charles Schwab.

"The November muni rally continues as month-to-date returns are now at 4.68%, pushing us further into positive territory for the year as year-to-date returns now stand at 2.35%," said Jason Wong, vice president of municipals at AmeriVet Securities.

"The market has had a solid tone to it recently even with the strong rally seen this month," Roberto Roffo, managing director and portfolio manager at SWBC Investment Management, said of the Nov. 10 rally where municipal yields in 10 years fell by as much as 40 basis points.

There had been speculation of layoffs in Citi's municipal division as several high-profile employees had been departing the firm over the last year, but sources said they have not heard of any muni layoffs.

The large drop in yields since the end of October can be reflected in sentiment that investors expect a potentially dovish Fed next year, and that a soft landing narrative gives them "permission to finally purchase the bonds they've been admiring," said MMA's Matt Fabian.