On Wednesday, municipal bonds saw improvement as focus shifted to the primary market. Chicago entered the market after a delay to price its general obligation bond deal, alongside deals from the Triborough Bridge and Tunnel Authority, the Pennsylvania Turnpike Commission, and the Las Vegas Valley Water Department. This positive movement came on the heels of U.S. Treasuries and equities closing the session with a mixed performance following the release of CPI figures that matched consensus levels. The market also factored in the possibility of a rate cut in September.
Expert Viewpoints
According to John Kerschner, head of US Securitised Products and Portfolio Manager at Janus Henderson Investors, the bond market had already rallied significantly since July. However, he emphasized the importance of more guidance from the Fed regarding the rate cut path. Scott Anderson, chief U.S. Economist at BMO Capital Markets, acknowledged the progress towards the Fed’s inflation goals but expressed skepticism about the likelihood of a larger rate cut.
Triple-A yield curves experienced a slight decline on Wednesday, while USTs showed weakness on the short end but performed better on the longer end. Muni to UST ratios fluctuated throughout the day, indicating varying levels of investor confidence in different maturity periods. Despite the fluctuations, there was a general sense of stability in the market.
The Investment Company Institute reported inflows into municipal bond mutual funds, signaling a positive sentiment among investors. Exchange-traded funds also saw significant inflows, reflecting a broader interest in municipal bonds. On the other hand, tax-exempt money market funds experienced outflows, highlighting a shift in investor preferences.
Primary Market Activity
In the primary market, various entities priced bond deals including the Triborough Bridge and Tunnel Authority, Chicago, the Health, Educational and Housing Facility Board of the City of Chattanooga, and the Pennsylvania Turnpike Commission. The competitive market also saw the Las Vegas Valley Water Department selling its GO water refunding bonds. These transactions underscored a strong appetite for municipal bonds in the current market environment.
Looking ahead, several notable entities are set to price bond deals in the coming days, including the California Community Choice Financing Authority, the Maryland Economic Development Corporation, the New Jersey Health Care Facilities Financing Authority, and the Reno-Tahoe Airport Authority. These upcoming deals are expected to attract attention from investors and further contribute to the vibrancy of the municipal bond market.
The municipal bond market showed resilience and positive momentum in Wednesday’s trading session. Despite uncertainties surrounding future rate cuts and inflation levels, investor interest remained strong, as evidenced by the influx of funds into various municipal bond instruments. With a diverse range of issuers entering the market and a healthy pipeline of upcoming deals, the municipal bond market continues to be an attractive option for investors seeking stability and favorable returns.