Volatility

With volatility and illiquidity realities for the foreseeable future, insights into new-issue and secondary pricing are critical.

As 2022 unfolds, a confluence of challenges has affected pricing, trading and fund flows in the muni market.

As municipals continue to underperform the moves in U.S. Treasuries, current ratios are attractive and present a buying opportunity.

February volume was $26.481 billion in 594 deals versus $37.052 billion in 981 issues a year earlier, bringing total volume for the first two months of the year to $51.426 billion, or 20% less than 2021.

The Build Back Better in its current form essentially has been killed by Sen. Joe Manchin, likely limiting the potential for tax hikes in the coming year.

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

Exactly one year after record billions were pulled from municipal bond mutual funds and the market was in free fall, municipals followed U.S. Treasuries this week as the markets continued to dismiss the Fed's outlook on inflation and rates.

Municipals were little changed Monday as participants await the larger new-issue calendar while equities and U.S. Treasuries react to news out of Washington and COVID-19 ravages the globe.

Even with COVID-19-related shutdowns — a New York City lockdown may be imminent — issuers are pricing bonds into an extremely low-rate environment.

The fragility of the economy amid protests and the continuing coronavirus threats have dealers unloading some risk.

A complete disconnect between liquidity providers and seekers exposed the market’s inefficiencies: an asset class dominated by a limited investor base—retail investors—has grown increasingly concentrated.

The secondary market took a backseat to the primary Thursday with yields holding steady while Lipper reported $833 million of inflows, the first since February 26.

ICI reported nearly $3 billion of outflows, which is foretelling that coronavirus-driven volatility still lingers even if the muni market has rallied by at least 60 basis points since early-April high yields.

Technical and fundamental concerns surrounding credit and supply could present challenges for the market going forward but participants tepidly welcomed signs of stability.

There will be more queasiness ahead of any calm in municipals as adjustments to the coronavirus-induced climate continue to test the market’s resolve.

Forced selling continues and credit spreads are widening as much as 200 basis points in spots making for a large bid-ask disconnect in the market.

Coronavirus-led fears are leading investors, particularly retail, to cash once again amid uncertainty surrounding how much and what maturities of municipal bonds the Fed will purchase once its program begins.

The primary market remained mostly on the sidelines with issuers slow to jump back into coronavirus-driven volatility while also awaiting Fed engagement.

The municipal bond market is poised to begin digesting larger primary issuance in the coming week after a massive rally in recent days.

Benchmark yields fell another 50 to 60 basis points, dropping them more than 1.5% in just four days. Meanwhile, a $450 million taxable new-issue came to market and was eight times oversubscribed.