Taxable bonds

The U.S. Treasury selloff caught up to tax-exempts with two to three basis point cuts to scales, but munis still outperform.

Municipals triple-A benchmarks continue the trend of ignoring other markets to start 2022. The new year will likely usher in slower growth and continued inflationary pressures, analysts said.

2022 volume projections are clouded by many uncertainties. What is not murky is that demand for municipals is unlikely to fade.

Chicago's captured a new low in recent history on tax-exempt spreads but the taxables, which were downsized by $500 million, faced a tougher road amid Treasury volatility.

Total November volume was up 58.3% to $33.818 billion versus $21.359 billion a year earlier, but the figure is average over a 10-year period. A combination of factors from policy uncertainty in Washington to fears of rising rates led to the increase.

A majority of firms anticipate less volume in 2022 than the record hit in 2020, but how policies from Washington and the path of overall economic activity in a still-recovering global economy with COVID overhang make predicting volume more difficult.

The Thanksgiving holiday-shortened week, next-to-no supply and few economic data releases should keep munis steady.

The speculative grade bond sale is part of the financial process of returning the Phoenix-based university to nonprofit status after years as a for-profit.

Investors put nearly $2 billion into municipal bond mutual funds for the most recent week with high-yield reversing a downward course to hit $1.2 billion following just $1 million a week prior.

A lighter, $5 billion calendar, heavy on healthcare, kicks off November. Most participants agree volatility in U.S. Treasuries will be a leading factor for municipal market performance. Uncertainty in Washington also isn't helping the asset class.

October has, on average, been the heaviest new-issue month of the year. Analysts said the lower volume, particularly taxables, was led by many issuers sitting on the sidelines, waiting for a potential package from Washington, D.C.

Seventy-seven percent of respondents to a Bond Buyer survey said there should be universal ESG standards and just over half said ESG is “critical” or “very important." Consensus on how to and who should create such a language is less clear.

The lion's share of the deal is taxable, with a $20 million tax-exempt new money series; proceeds from the taxables will refund outstanding debt.

The increase in yields and spread widening across municipal sectors has given some pause to high-yield investors after months of stagnation.

Municipals took a breather Monday, largely ignoring stock market volatility and softer U.S. Treasuries, ahead of a solid $9 billion new-issue week.

September issuance was down more than 32% from the same month in 2020; total issuance so far this year is at $346.48 billion, down 2.4% compared to last year.

The high-grade muni scales saw cuts of up to four basis points in a continued selloff Monday as the market faces a robust slate of new issues.

Month-to-date returns for municipals are in the red with the Bloomberg Fixed Income Indices municipal index returning -0.12%, high-yield at -0.15% and taxables at -0.32%.

Municipals continue to stay in their own lane. ICI reported $1.4 billion of inflows in the 28th consecutive week.

Several strategists estimate the municipal market will be 50% taxable in five years if a direct-pay bond option makes its way into law.