A wave of municipal-bond sales scheduled for this week will test a recent rebound in buyer demand after investors sold their holdings during April’s market rout.
Roughly $14 billion of muni debt is scheduled to come to market over the next five days, according to data compiled by Bloomberg. That is running about 70% higher than the average weekly volume over the last five years.
The influx of expected supply continues a pickup ever since the market began to settle down after April’s tariff-fueled swings. Investors waded back into muni products with state and local government bond funds seeing $1.1 billion of inflows in the week ended May 7, snapping three consecutive weeks of withdrawals, according to data from LSEG Lipper Global Fund Flows. The largest municipal-bond exchange-traded fund, MUB, collected $260 million of cash last week — the most since November.
“We believe that it is still a buyers’ market, with the tone again to be driven by the direction and magnitude of ETF flows,” wrote municipal strategists at JPMorgan Chase & Co. in a Friday research note. The group, led by Peter DeGroot, also noted that mid-month reinvestment cash will also help support the supply.
This week’s supply includes several large transactions, such as New York City Transitional Finance Authority’s roughly $1.5 billion offering for capital expenditures and to refinance debt and Harris County Hospital District’s nearly $840 million deal to expand its footprint.
Chris Brigati, chief investment officer at SWBC, is keeping an eye on both deals as bellwethers for the market because they will help determine the market tone. “It’s a bigger week simply because deals were postponed during the chaos and so now they’re coming back out,” said Brigati.
Bonds sales are picking up in other segments of fixed income as well. Sixteen firms are rushing to the investment-grade primary market on Monday as risk assets surged on a US-China trade truce. And auto companies are helping to boost sales in the European corporate bond market.
“There’s still a fair amount of uncertainty out there that the market is going to continue to digest,” said Sylvia Yeh, a partner at Goldman Sachs Asset Management, pointing to fiscal, monetary, political, and technical factors that may weigh on demand. “I think we’re going to have a lot of wood to chop for the foreseeable future.”
Despite the clouded outlook, investors were eager to pounce on at least one deal last week. An agency in Vail, Colorado, sold unrated debt to help finance the construction of apartment buildings which will house middle-income workers in the resort town.
The transaction — initially marketed at $118.3 million — drew more than $2 billion of orders, said Robyn Moore, managing director at Piper Sandler, the underwriter on the issue. The sale was upsized to $126 million and the spread on one maturity was lowered by 20 basis points from preliminary pricing, she said.
“We definitely had some market tailwind going into pricing week,” Moore said.
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