"Investors are acknowledging that the Fed is nearing the end of its rate tightening cycle which is supporting a relief rally in stocks and lower bond yields, said Bryce Doty, senior vice president at Sit Investment Associates.
The 2023 "January effect" seems to be "displaying typical behavior given relatively thin issuance this month and demand patterns that have been buoyed by four of six reinvestment needs," said Jeff Lipton, managing director of credit research at Oppenheimer Inc.
Inflows returned, with the Investment Company Institute reporting investors added $1.982 billion to mutual funds in the week ending Jan. 11, after $3.157 billion of outflows the previous week.
Outflows continued as Refinitiv Lipper reported $2.477 billion was pulled from municipal bond mutual funds in the week ending Wednesday after $1.946 billion of outflows the week prior.
The muni market "is being teed up to enter 2023 from a relative position of strength," said Jeff Lipton, managing director of credit research at Oppenheimer Inc.