Securitization

Munis are directionally trading with USTs but underperforming in days where USTs rally and outperforming in days where USTs sell-off, said Greg Gizzi, head of U.S. fixed income and head of municipal bonds at Macquarie Asset Management.

Munis held "their firmer tone as Treasuries continued to rally once more this past week," said Jason Wong, vice president of municipals at AmeriVet Securities.

Yields on top-rated municipal bonds fell as much as nine basis points on Friday as bank contagion fears resurfaced and investors looked to safe-haven securities. The primary calendar is rebounding, with volume rising to an estimated $5.4 billion in the week ahead.

The state House Appropriations Committee dropped $3.86 billion from a supplemental spending bill, but its chair said the money is "still in play."

Outflows continued as Refinitiv Lipper reported $427.082 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $461.123 million of outflows the week prior.

"In short, it appears that the end of the current tightening cycle is coming into view," said Wells Fargo Securities Chief Economist Jay Bryson.

After a tumultuous week, expect another ahead, said Matt Fabian, a partner at Municipal Market Analytics.

The banking sector crisis caused a flight-to-quality bid in USTs last week.

Investors will be greeted Monday with a new-issue calendar estimated at $4.064 billion.

Outflows continued as Refinitiv Lipper reported $461.123 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $307.815 million of outflows the week prior.

"The main question for investors recently has been: will we see bank selling of municipals that exerts pressure on the market, and what kind of market effects could occur," Barclays strategists said.

"The muni market is no different than others, where fear and greed drive the trends," said Peter Delahunt, StoneX's managing director.

Triple-A benchmarks have fallen five to 10 basis points, depending on the scale.

Investors will be greeted Monday with a new-issue calendar estimated at $6.041 billion.

A $3.52 billion Texas Natural Gas Securitization Finance Corp. deal includes a make-whole redemption over three years to call bonds if the state appropriates funds to pay them off.

Outflows continued as Refinitiv Lipper reported $307.815 million was pulled from municipal bond mutual funds in the week that ended Wednesday after $905.030 million of outflows the week prior.

The two-year UST is now a full point above the 10-year UST, something that hasn't happened since 1981.

Ellis Phifer, managing director and senior strategist in the fixed income research department at Raymond James, talks with Chip Barnett about the state of the bond markets. (Taped Feb. 16; 15 minutes)

Federal Reserve Chair Jerome Powell will testify beore Congress twice this week and Friday brings the latest employment report.

The much-delayed $3.5 billion deal has an optional limited make-whole redemption if state lawmakers appropriate funds to defray costs for natural gas customers.