Munis steady, new-issue calendar grows to $13.5B

Munis were steady Friday as U.S. Treasuries cheapened and equities ended mixed after a softer-than-expected inflation print.

With the "fragile" ceasefire in the United States-Iran conflict, the risk of higher rates beyond those from March has largely been removed, said BofA strategists.

For the majority of the week, the 10-year UST dipped below 4.30% and traded between 4.20% and 4.30% before rising above 4.30% on Friday, they said.

"This is the macro rates area we deem to be neutral for muni market performance and one conducive to the recovery of muni ratio damage seen during the conflict," BofA strategists said.

A more "bullish development" could happen if the 10-year UST consistently trades below 4.20%, they said.

New-issue calendar
Next week's new-issue calendar is an estimated $13.479 billion, with $11.435 billion of negotiated deals on tap and $2.044 billion of competitives.

New York City leads the negotiated calendar with $2.3 billion of general obligation bonds.

The competitive calendar is led by the Long Beach Unified School District, California, with $402.72 million of GO refunding bonds.

CPI
Terming the March consumer price index report "a touch softer than expected," Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute, said it offered "modest support" to stocks, which were trading based on Mideast ceasefire negotiations. "The bond market remains skeptical, with U.S. Treasury yields edging slightly higher," she said.

Still, John Sherman, co-head of tactical balanced strategies team and senior portfolio manager at Federated Hermes (FHI), expected any reaction to "likely be more muted than usual."

"There's not much bandwidth for a positive market reaction as the prospect for energy price moderation from last month's spike and the extent of bleed-through into core measures of inflation remains unknown," he said.

"Currently the bond market is telling us that the [Federal Reserve] will continue to talk tough around inflation but will carry a stick the size of a twig," said John Kerschner, global head of securitized products and portfolio manager at Janus Henderson Investors. "The markets are pricing in status quo on fed funds for at least the next 10 Fed meetings."

Gary Siegel contributed to this report.