Week kicks off with strong retail demand for new issues
7 min read
Municipals were steady to start the week while the focus moved to the hefty primary slate as several deals priced bonds for retail to good demand. U.S. Treasuries were slightly weaker and equities closed the session in the black.
The two-year muni-to-Treasury ratio Monday was at 64%, the three-year at 66%, the five-year at 66%, the 10-year at 70% and the 30-year at 86%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 65%, the three-year at 66%, the five-year at 66%, the 10-year at 70% and the 30-year at 86% at 3:30 p.m.
While some investors may have anticipated a “sharper rally” given the Fed cutting rates last week, at least one rate cut was priced in by fixed-income markets, said AllianceBernstein strategists.
Investor demand continues to accelerate, with muni mutual funds seeing
The 12 consecutive weeks of inflows into muni mutual funds, where fund flows have topped $1 billion three times, can be partly explained by the current return environment, said Jeff Timlin, a managing partner at Sage Advisory.
Munis ended last week on track to see positive returns for the fourth straight month, the first time since 2021.
Munis are returning 0.86 month-to-date, pushing year-to-date returns to 2.16%.
Retail chases returns and “they wait until the returns are significantly positive before they put money … back into the market,” Timlin said.
Furthermore, several factors make today “an attractive entry point” into the muni market, AllianceBernstein strategists said.
For one, “municipal valuations are cheap to fair value relative to U.S. Treasuries,” partially due to the surge of supply in 2024, they said.
Bond Buyer 30-day visible supply is at $20.09 billion and issuance is robust this week, with nearly $14 billion on tap, led by the Texas Water Development Board with $1.621 billion of tax-exempt and taxable state water implementation revenue fund master trust revenue bonds.
The influx of supply will be “easily digested” as some of it comes from less frequent issuers, AllianceBernstein strategists said.
Goldman Sachs held a one-day retail order period for the recently upgraded (Aa1/AA/AA/AA+) and infrequent issuer, the New York Power Authority’s $404.375 million of green revenue bonds Monday. While pricing details were not yet available, a sell side source said the issuer saw more than $400 million of orders on the $104 million offered to retail investors.
Also in the primary Monday, Siebert Williams Shank held a one-day retail order for $799.92 million of various capital project lease revenue refunding bonds, Series C, from the California State Public Works Board (Aa3/A+/AA-/), with 5s of 9/2025 at 2.60%, 5s of 2029 at 2.49%, 5s of 2034 at 2.89% and 5s of 2039 at 3.16%, callable 9/1/2034.
Loop Capital Markets held a one-day retail order for $787.675 million of water and sewer second general resolution revenue bonds from the New York City Municipal Water Finance Authority (Aa1/AA+/AA+/). The first tranche, $600 million of Fiscal 2025 Subseries AA-1, saw 5s of 6/2050 at 3.84% and 4s of 2054 at 4.15%, callable 12/15/2034.
The second tranche, $187.675 million of Fiscal 2025 Subseries AA-2, saw 5s of 6/2030 at 2.49%, 5s of 2046 at 3.68% and 5s of 2049 at 3.81%, callable 12/15/2034.
However, there remains a supply/demand imbalance, “tilted” toward demand outweighing supply, Timlin said.
“Stuff is getting done in the primary market, bonds are getting taken down the secondary market, and there’s not any replenishment from either the primary or secondary market,” leading to that imbalance, he said.
Until early November, there will continue to be elevated supply, with demand set to “gobble it up whenever they can get supply,” Timlin said.
“Both known and unknown sources of capital within the municipal market are deploying or redeploying capital back into the market when there’s availability of supply,” he added.
“This, combined with the fact that investor demand is likely to increase with the Fed cutting rates, implies a strong technical tailwind during the fourth quarter,” AllianceBernstein strategists said.
Additionally, taxable equivalent yields remain “compelling,” they noted.
For investors in the top federal tax bracket, “the Index currently sports a taxable equivalent yield to worst of 5.63% — significantly higher than the 4.17% yield to worst of the (taxable) Bloomberg US Aggregate Bond Index,” AllianceBernstein strategists said.
Those income levels, along will falling yields-induced price appreciation, suggest a “bright future” for the muni market.
AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.50% and 2.30% in two years. The five-year was at 2.31%, the 10-year at 2.63% and the 30-year at 3.52% at 3 p.m.
The ICE AAA yield curve was little changed: 2.52% (+1) in 2025 and 2.31% (unch) in 2026. The five-year was at 2.31% (unch), the 10-year was at 2.61% (+1) and the 30-year was at 3.50% (unch) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.50% (+1) in 2025 and 2.32% (unch) in 2026. The five-year was at 2.32% (unch), the 10-year was at 2.59% (+1) and the 30-year yield was at 3.50% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.43% in 2025 and 2.38% in 2026. The five-year at 2.36%, the 10-year at 2.61% and the 30-year at 3.48% at 3:30 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.587% (+1), the three-year was at 3.485% (+2), the five-year at 3.506% (+2), the 10-year at 3.749% (+2), the 20-year at 4.132% (+2) and the 30-year at 4.092% (+2) at the close.
Primary calendar:
The Texas Water Development Board (/AAA/AAA/) is set to price Thursday $1.621 billion of state water implementation revenue fund master trust revenue bonds, consisting of $1.259 billion of tax-exempts, Series 2024A, serials 2025-2037, terms 2038, 2039, 2040, 2041, 2042, 2043, 2044, 2049, 2054, 2059; and $362.465 million of taxables, Series 2024B, serials 2025-2039, terms 2044, 2054. BofA Securities.
The Los Angeles Unified School District (Aa2//AAA/AAA) is
The Port Authority of New York and New Jersey (Aa3/AA-/AA-/) is set to price Wednesday $1.007 billion of consolidated bonds, consisting of $551.695 million of Series 245th, serials 2025-2028, 2030-2044, terms 2049, 2054, and $456.060 million of Series 245th AMT, serials 2025-2028, 2030-2034, 2036-2044. BofA Securities.
The Salt River Project Agricultural Improvement and Power District (Aa1/AA+//) is set to price Wednesday $700 million of Salt River Project electric system revenue bonds, consisting of $551.12 million Series A, serials 2026-2027, 2029-2038, 2040, 2042-2044, terms 2049, 2054, and $144.88 million of Series B, serials 2039, 2042. BofA Securities.
Lee County, Florida, (A1//A/AA-) is set to price Tuesday $564 million of AMT airport revenue bonds, Series 2024, serials 2034-2044, terms 2049, 2054. BofA Securities.
The Board of Regents of the University of Texas System (Aaa/AAA/AAA/) is set to price Tuesday $511.995 million of revenue financing system refunding bonds, Series 2024B. Morgan Stanley.
Sacramento County (A2/A+//) is set to price Tuesday $478.26 million of airport system senior revenue bonds, Series 2024 non-AMT, serials 2028-2044, terms 2049, 2054. Wells Fargo.
The Power Authority of the State of New York (Aa1/AA/AA/AA+) is set to price $404.375 million of revenue bonds, Series 2024A. Goldman Sachs.
St. Cloud, Minnesota, (A2//AA-/) is set to price Tuesday $324.982 million of CentraCare Health System healthcare revenue bonds, Series 2024. Piper Sandler.
The Cypress-Fairbanks Independent School District (Aaa/AAA//) is set to price Wednesday $303.965 million PSF-insured unlimited tax school building bonds, Series 2024B. Wells Fargo.
The Charleston County Airport District, South Carolina, (A1/A+//) is set to price $300.29 million of airport revenue bonds, consisting of $97.73 million Series 2024 AMT (A1/A+//), serials 2041-2044, terms 2049, 2054, and $202.56 million of tax-exempts, serials 2028-2044, terms 2049, 2054. BofA Securities.
The City and County of Denver (Aaa/AAA//) is set to price Tuesday $263.98 million of water revenue refunding bonds, Series 2024A, serials 2025-2044, terms 2049, 2054. BofA Securities.
The Industrial Development Authority of the City of Sierra Vista, Arizona, unrated, is set to price $208.665 million of American Leadership Academy education facility revenue bonds, Series 2024, terms 2034, 2039, 2044, 2049, 2054, 2059, 2064. Baird.
Tacoma School District No. 10, Washington, (Aaa/AA+//) is set to price Tuesday $146.465 million of unlimited tax general obligation bonds, insured by WA State SD Cr. Enhancement Program, serials 2026-2044, term 2048. RBC Capital Markets.
The Missouri Housing Development Commission (/AA+//) is set to price Thursday $142 million of single-family mortgage revenue bonds, consisting of $130 million of Series 2024G, serials 2025-2036, terms 2039, 2044, 2049, 2054, 2055, and $12 million of Series H taxables, terms 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2039, 2044, 2049, 2054. Stifel.
The Dormitory Authority of the State of New York (A1/A+//) is set to price Tuesday $122.86 million of NYU Langone Hospitals Obligated Group revenue bonds. Goldman Sachs.
The Arlington Higher Education Finance Corp. (/AAA//) is set to price Wednesday $110.57 million of PSF-insured LifeSchool Dallas education revenue bonds. D.A. Davidson.
Erie County, New York, (/AA//AA) is set to price Tuesday $110 million of general obligation public improvement serial bonds (
The California Enterprise Development Authority (/A//) is set to price Tuesday $109.135 million of Castilleja School Foundation Project revenue bonds, serials 2035-2044, terms 2049, 2054. Stifel.
The Oklahoma Water Resources Board (/AAA//) is set to price Wednesday $109.105 million of state loan program revenue bonds, serials 2025-2039, terms 2044, 2049, 2054. BOK Financial Securities.
The Galena Park ISD (Aaa///) is set to price $100 million of unlimited tax school building bonds, PSF guaranteed, serials 2025-2049. Loop Capital Markets.
Competitive:
The Kansas Development Finance Authority is set to sell $270.625 million of Kansas Department of Health and Environment revolving funds revenue bonds, Series 2024SRF, at 11:15 a.m. eastern Tuesday.
Jefferson County School District, Kentucky, is set to sell $139.720 million of general obligation bonds at 11 a.m. eastern Tuesday.
The Indiana Finance Authority is set to sell $175 million of state revolving fund program green bonds at 10:45 a.m. eastern Wednesday.
Waltham, Massachusetts, is set to sell $118.9 million of general obligation bonds at 11 a.m. eastern Wednesday.
Montgomery County, Maryland, (Aaa/AAA/AAA/) is set to sell $280 million of general obligation bonds at 10 a.m. eastern and $456.465 million of GO refunding bonds at 10:15 a.m. Thursday.
