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Outflows continue as Refinitiv Lipper reported investors pulled $1.345 billion from municipal bond mutual funds for the week ending Wednesday.

Despite the firmer tone Tuesday, May performance has put munis on track for their worst May since 1986.

Strength that began on Tuesday and continued Wednesday marked the first sessions since early May for positive performance after a hefty selloff, noted Kim Olsan, senior vice president at FHN Financial.

The U.S. economy is "too resilient and this will force the Fed to not only deliver more tightening but also to keep rates higher for much longer," OANDA's Edward Moya said. NYC and Connecticut GOs on tap.

Refinitiv Lipper reported $847.068 million of outflows from municipal bond mutual funds, $420.675 million of which was high-yield.

After underperforming USTs last week, "munis have given up their earlier performance advantage for August with both asset classes currently earning virtually the same negative returns," said Jeff Lipton, managing director of credit research at Oppenheimer Inc.

Losses for August climbed last week, with month-to-date returns in the red at negative 1.40% on the Bloomberg muni index, high-yield seeing 0.99% losses, taxables at 2.01% losses and the impact index losing 1.70%.

Investors will be greeted Monday with a decrease in supply with the new-issue calendar estimated at $6.711 billion, down from total sales of $10.318 billion.

New York Dormitory Authority school bonds and Northwell Health priced and upsized, while Wisconsin and Oregon offered general obligation bonds. Analysts say municipal curves are oversold, creating a buying opportunity.

Despite outsized volatility and liquidity challenges ahead, the possibility of relief for munis is not too far off, analysts say, but USTs lead the way for exempts.