Munis strike cautious tone ahead of inflation data, smaller calendar

Municipals were mostly steady Monday after a week of market volatility, as U.S. Treasury yields fell and equities were mixed at the close.

Market participants are sitting back ahead of the week’s economic indicators, led by the Producer Price Index and Consumer Price Index reports on Tuesday and Wednesday, respectively.

“The Treasury market may get whipsawed this week depending on the PPI and CPI reports,” noted Cooper Howard, fixed income strategist at Charles Schwab. “We expect inflation to continue to trend lower, which gives the Fed cover to cut rates at the upcoming meeting. We expect the yield curve to bull-steepen but with some volatility.”

Howard noted that the muni yield curve is back to positive as short-term yields have moved lower. “We expect the disinversion to continue as the plan to cut rates becomes clearer,” he said.

Muni to UST ratios were mostly steady Monday, with the two-year muni-to-Treasury ratio at 66%, the three-year at 69%, the five-year at 69%, the 10-year at 69% and the 30-year at 85%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 66%, the three-year at 67%, the five-year at 68%, the 10-year at 69% and the 30-year at 85% at 3:30 p.m.

Muni yields rose on the week to end a five-week rally with 10-year notes rising 8.6 basis points to end Friday at 2.68%, noted Jason Wong, vice president of municipals at AmeriVet Securities.

Despite this, munis outperformed USTs as the 10-year muni-UST ratio was at 67.28% versus the prior week’s ratio of 68.2%, Wong said.

Munis are also showing better value relative to corporate bonds, Howard said. 

“After a long-period of muni yields not being that attractive relative to corporates, that’s starting to shift,” Howard said. “The all-in tax rate that would result in the same after-tax yield for munis and corporates is about 38% which is below its longer-term average and near the low over the past few months. Additionally, credit quality for munis is higher on average than corporates.”

While the market swings last week pushed a few deals into the day-to-day calendar, and some more issuers may delay upcoming deals in anticipation of the September Federal Open Market Committee meeting, this week’s $7.4 billion slate is serving as a relief, especially as new cash slows down, Birch Creek strategists said.

Issuance, though, will remain heavy in the second half of August through September.

There are already some large deals showing up on the horizon and Bond Buyer 30-day visible supply sits at $13.7 billion.

New York City is set to come to market August 21 with $1.8 billion of GOs — $1.5 billion of tax-exempts in the negotiated market and $300 million of taxables in the competitive market.

The Dallas Forth Worth Airport is set to price the week of August 19 around $750 million of new-money and refunding bonds.

The San Antonio Electric and Gas Systems is set to price the week of August 26 at least $760 million of new series revenue refunding bonds.

The New York City Transitional Finance Authority is set to price the week of September 9 $1.8 billion of future tax secured subordinate bonds.

Investors continued to add money into muni mutual funds, which saw inflows of $671.5 million last week after $1.1 billion of inflows the week prior, according to LSEG Lipper.

This is the sixth straight week of inflows as investors “continue to gain confidence that the Fed will cut rates in September,” Wong said.

However, Birch Creek strategists noted the “tally runs through Wednesday and mostly reflected the bond grab post-FOMC and payrolls.”

Tuesday through Thursday saw a combined total $689 million of outflows, “with the bulk of the hit” coming from exchange-traded funds, they said.

AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.68% and 2.64% in two years. The five-year was at 2.59%, the 10-year at 2.70% and the 30-year at 3.58% at 3 p.m.

The ICE AAA yield curve was narrowly mixed: 2.71% (-1) in 2025 and 2.68% (-1) in 2026. The five-year was at 2.59% (+1), the 10-year was at 2.70% (-1) and the 30-year was at 3.56% (-1) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.70% (unch) in 2025 and 2.68% (unch) in 2026. The five-year was at 2.58% (+1), the 10-year was at 2.70% (unch) and the 30-year yield was at 3.57% (unch) at 3 p.m.

Bloomberg BVAL was unchanged: 2.68% in 2025 and 2.65% in 2026. The five-year at 2.59%, the 10-year at 2.66% and the 30-year at 3.58% at 3:30 p.m.

Treasuries were firmer.

The two-year UST was yielding 4.017% (-3), the three-year was at 3.835% (-4), the five-year at 3.754% (-4), the 10-year at 3.910% (-4), the 20-year at 4.292% (-2) and the 30-year at 4.199% (-3) at 3:30 p.m.

Primary calendar
The California Community Choice Financing Authority (A1///) is set to price $1 billion of Athene Annuity-funded Clean Energy Project Revenue Bonds, Series 2024. Goldman Sachs. 

The Triborough Bridge and Tunnel Authority (/A+/AA+/AA+/) is set to price Thursday $700 million of MTA Bridges and Tunnels Revenue Bonds, consisting of $300 million general revenue bonds, Subseries 2024 A-1, and $445 million general revenue refunding bonds, Subseries 2024 A-2. Ramirez & Co.

The Board of Regents of the University of Houston (Aa2/AA//) is set to price Tuesday $266.81 million of consolidated revenue and refunding bonds, consisting of $215.7 million taxables, Series 2024B, and $51.11 million, Series 2024A. J.P. Morgan.

Jacksonville, Florida (/AA/AA+/AA/) is set to price Tuesday $246.19 million of special revenue and refunding bonds, Series 2024, serial 2025-2054. RBC Capital Markets.

The New Jersey Health Care Facilities Financing Authority (A2//AA-/) is set to price Thursday $234.515 million of Inspira Health Obligated Group Issues revenue and refunding bonds, Series 2024A. J.P. Morgan.

The Reno-Tahoe Airport Authority (A3/A//A+/) is set to price Thursday $234.510 million of airport revenue bonds, consisting of $156.915 million AMT-bonds, Series 2024A, serial 2025-2044, terms 2049, 2054, and $77.595 million non-AMT bonds, Series 2024B, serial 2027-2044, terms 2049, 2054. BofA Securities.

Allegheny County (Aa3/AA-//) is set to price Wednesday $218.485 million of GO refunding bonds, consisting of $152.635 million, Series C-80, serial 2026-2054, and $65.85 million, Series C-81, serial 2024-2034. PNC Capital Markets.

The El Paso County Hospital District (//A-/AA-/) is set to price Tuesday $187.42 million of GO refunding bonds, Series 2024. J.P. Morgan Securities.

The VIA Metropolitan Transit Advanced Transportation District, Texas, (/AAA//) is set to price Tuesday $144.52 million of sales tax revenue bonds, Series 2024, serial 2028-2044, terms 2049, 2054. RBC Capital Markets.

The Providence Public Buildings Authority (A1/AA//) is set to price Tuesday $135 million of Assured Guaranty-Insured capital improvement program projects revenue bonds, serial 2025-2044. Raymond James.

Ohio (Aa1/AA+//) is set to price Tuesday $121.695 million of major new state infrastructure project revenue bonds, Series 2024-1, serial 2025-2036. Wells Fargo.

The Maine State Housing Authority (Aa1/AA+//) is set to price Tuesday $120 million of mortgage purchase social bonds, 2024 Series E, serial 2054. BofA Securities.

The South Carolina Greenville-Spartanburg Airport District (A3/A+//) is set to price Tuesday $105.275 million of airport revenue bonds, consisting of $39.12 million of non-AMT bonds, Series 2024A, term 2054, and $66.155 million of taxables, Series 2024B, serial 2025-2039, term 2048. BofA Securities. 

The Joshua Independent School District, Texas, (/AAA//) is set to price Tuesday $101.06 million of PSF-insured unlimited tax school building bonds, serial 2025-2044, term 2049. BOK Financial Securities.

The Maryland Department of Housing and Community Development (Aa1//AA+/) is set to price Monday $100 million of taxable residential revenue social bonds, 2024 Series D. Morgan Stanley & Co.

The Delaware Valley Regional Finance Authority (A1/A+//) is set to price Tuesday $100 million of local government revenue bonds, 2024 Series A. RBC Capital Markets. 

Competitive
Miami-Dade County School District, Florida, is set to price $400 million of tax anticipation notes, Series 2024, at 11 a.m. eastern Tuesday.

Miami-Dade County, Florida, is set to sell $185.655 million of Building Better Communities Program GO bonds, Series 2021A, 9:30 a.m. eastern Tuesday.

The North Dakota Public Financing Authority (Aaa/AAA/) is set to sell $205.540 million of State Revolving Fund Program Bonds, Series 2024A, 11:15 a.m. eastern Tuesday.

The Las Vegas Valley Water Department is set to sell $295.215 million of GO water refunding bonds, Series 2024A, 11:15 a.m. eastern Wednesday.