Municipal bond market participants are calling the COVID-19-led sell-off worse for the market than the aftermath of September 11th and the 2008 financial crisis in 2008 combined.
The sell-off continued in the municipal market Thursday, with AAA benchmarks down by more than a half percentage point. The primary market was held at a standstill. Lipper reported more than $1.76 billion of outflows Thursday.
What is transpiring has career-long veterans of the space saying the muni market has been put in a position they’ve never seen before.
Participants don’t have room to breathe in this rapidly changing landscape and investment grade munis are suffering, being dragged down by the overall panicking in the market, with several noting that this is a liquidity-driven crisis.
“There is forced selling, impossible hedging and a pandemic,” said one Southern trader. “Uncertainty is breeding uncertainty and as usual, the bond market solution to these problems is much higher yields. This is the craziest market that I have seen — way different and way worse than 2008.
(Read more: The Bond Buyer)

Muni market participants asked Congressional leaders to use a stimulus bill as an opportunity to push muni bond initiatives and increase infrastructure efforts amid economic stress caused by COVID-19.
In a letter sent by the Public Finance Network to Congressional leadership Thursday afternoon, the group asked for the restoration of tax-exempt advance refunding, an increase in the cap for bank-qualified debt, and the creation of new direct-pay bonds shielded from sequestration.
“If Congress manages to get a quick bill out this week, these in the weeds provisions may make it in,” said Emily Brock, director of the Government Finance Officers Association’s federal liaison center. “If not, we do legitimately believe that these are the sorts of things that can free up state and local resources. In addition, those resources could be used to address the pandemic that is upon us.”
(Read more: The Bond Buyer)