Securitization

While "munis are set up for better performance, perhaps modest single-digit returns, the near-term outlook for fund flows will make for a challenging read," Oppenheimer's Jeff Lipton said.

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Elevated new issues, Federal Deposit Insurance Corp. sale lists, and heavy reinvestment cash "helped to offset each other [last] week and keep the muni market stable," said Birch Creek strategists.

Municipals have continued outperforming, "building on the trend that started in late May," Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel said.

"How fund flows end up shaping up this week is going to be very meaningful for how we start the summer," said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.

The Investment Company Institute reported investors pulled another $374 million out of municipal bond mutual funds in the week ending May 31, after $671 million of outflows the previous week

"June started out fairly strong for the municipal market as the relative cheapness attracted investors looking for an opening to start buying bonds at higher yields," said Roberto Roffo, managing director and portfolio manager at SWBC Investment Company.

Last week, munis underperformed the Treasury market "across the curve through Thursday with yields lower just 13bps," according to Birch Creek strategists. However, they said Friday's rally "in the front end helped pull shorter maturity munis ahead."

For the coming week, investors will be greeted with a new-issue calendar estimated at $8.213 billion.

Outflows continue as Refinitiv Lipper reported investors pulled $1.345 billion from municipal bond mutual funds for the week ending Wednesday.

Strength that began on Tuesday and continued Wednesday marked the first sessions since early May for positive performance after a hefty selloff, noted Kim Olsan, senior vice president at FHN Financial.

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Despite the firmer tone Tuesday, May performance has put munis on track for their worst May since 1986.

The U.S. economy is "too resilient and this will force the Fed to not only deliver more tightening but also to keep rates higher for much longer," OANDA's Edward Moya said. NYC and Connecticut GOs on tap.

Refinitiv Lipper reported $847.068 million of outflows from municipal bond mutual funds, $420.675 million of which was high-yield.

A tender offer and a debt service shortfall related to bonds issued in the wake of Winter Storm Uri popped up this month as its financial impact lingers.

The Investment Company Institute reported investors pulled another $137 million out of municipal bond mutual funds in the week ending May 17, after $290 million of outflows the previous week.

"It's good news/bad news for fixed-income markets," said Nuveen strategists Anders S. Persson and Daniel J. Close.

The work from home environment will reduce city property tax collections in coming months and years, analysts say, creating financial issues.

Since the 52-week low on April 12, yields have risen by an average of 46 basis points.