Securitization

Muni yields may "continue to stay elevated due to supply and demand factors," rather than concerns over credit quality, said Cooper Howard, a fixed income strategist at Charles Schwab.

Monday saw a reversal from the past week as muni yields rose three to 10 basis points, depending on the curve. Despite this, Monday's losses were not enough to erase last week's gains as yields are still lower than they were two weeks ago.

Investors pulled $1.258 billion from municipal bond mutual funds in the week ending Wednesday, following $3.302 billion of outflows the prior week, according to LSEG Lipper data.

The Investment Company Institute reported larger outflows for the week ending April 9 of $3.714 billion, following $1.15 billion of outflows the previous week.

Citi's exit may have aggravated illiquidity last week, but even the traditional leader in times of stress wouldn't have been able to calm the wild market moves.

If the muni market "stays here at these new relationships, we'll find its footing," said John Flahive, head of fixed income at BNY Wealth.

The firmness in the market Monday came from a "settling down" after one of its most volatile weeks since the pandemic, said Cooper Howard of Charles Schwab.

Friday saw munis sell off once more with yields cut 17 to 28 basis points, pushing muni-UST ratios higher but not quite reaching Wednesday's levels.

"Anytime you get a market off 50 basis points in a day, the bulk of that move is being driven by fast money and the fast money is in ETFs," said Michael Pietronico, CEO at Miller Tabak Asset Management.

Yields rose significantly for the fourth time this week as the aftereffects of President Donald Trump's tariffs continue to plague the financial markets.