Primary picks up steam, deals upsized
7 min read
Municipals were little changed Tuesday as the primary market picked up steam, led by two billion-dollar retail offerings and upsized deals for New York paper. U.S. Treasuries were firmer and equities closed the session up, led by the S&P 500 hitting a new record.
The two-year muni-to-Treasury ratio Tuesday was at 65%, the three-year at 66%, the five-year at 66%, the 10-year at 71% 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.
“Tax-exempt municipal bonds, which had been looking forward to the Fed like everyone else, blinked last week, yields ending about unchanged amid strong if not huge trading volume,” said Matt Fabian, a partner at Municipal Market Analytics.
It’s unclear where the market goes from here, what with several heavy few weeks of new-money issuance set to come before the election and possibly after, “noting solid, not huge fund inflows, half of which were into (not out of) money funds last week, steady, not surging [separately managed account] demand, and stable (we estimate) bank interest in securities,” he said.
In other words, demand for munis looks “fairly stable” for now, particularly after the 10- to 25-basis-point rally ended in the 30 days before the
This “bull-steepening adjustment” looks like the 30-day move before the beginning of the Fed’s last cutting cycle, at the end of July 2019, he said.
Fabian noted that in 2019, the front end expected Fed rate cuts to start, but the back end “took over rally leadership in the 30 days after the cut.”
“It’s not unreasonable to expect similar this year, but, with cash alternative products still so cheap, intermediate demand dependent on income-based SMAs that may not chase prices much higher, and long end demand not much coming from corporate buyers who still see tax-exempts as rich, taxables as too scarce, the strength of that 30-day after push is easily overestimated,” he said.
It appears to be “too conservative” to expect price weakness at most maturities as the primary calendars keep getting priced to sell, according to Fabian.
However, this week’s
And with issuance expected to remain robust at least through the end of October, the high volume may cause issues when coming to market during this time period, they said.
Despite this, several “bright spots” for munis remain, Persson and Close noted.
Partially due to the strength of the UST market, the muni market should remain “fundamentally sound,” they said.
And while monthly reinvestment has fallen, new money keeps flowing into munis, Persson and Close said.
“Also, as short-term rates continue to decline, investors must move further out on the yield curve to reach income objectives,” they said.
Munis continue to cheapen compared to USTs, leading to interest of institutional and non-U.S. crossover buyers, they said.
In the primary market Tuesday, RBC Capital Markets held a one-day retail order for
The second tranche, $103.16 million of taxable Series QRR bonds, saw 5s of 1/2025 at par, noncall.
BofA Securities held a one-day retail order for $1.012 billion of consolidated bonds from the Port Authority of New York and New Jersey (Aa3/AA-/AA-/). The first tranche, $553.245 million of non-AMT bonds, Series 245th, saw 5s of 9/2025 at 2.55%, 5s of 2030 at 2.51%, 5s of 2034 at 2.78%, 5s of 2039 at 3.15%, 5s of 2044 at 3.54%, 5s of 2049 at 3.75% and 5s of 2054 at 3.85%, callable 9/1/2034.
The second tranche, $458.53 million of AMT bonds, Series 246th, saw 5s of 9/2025 at 3.20%, 5s of 2030 at 3.19%, 5s of 2034 at 3.48%, 5s of 2039 at 3.73% and 5s of 2044 at 3.99%, callable 9/1/2034.
Loop Capital Markets priced and repriced an upsized $877.865 million of water and sewer second general resolution revenue bonds from the New York City Municipal Water Finance Authority (Aa1/AA+/AA+/), with slightly firmer in most maturities from Monday’s retail order. The first tranche, $700 million of Fiscal 2025 Subseries AA-1, saw 5s of 6/2050 at 3.86% (+2) and 4s of 2054 at 4.12% (-3), callable 12/15/2034.
The second tranche, $187.865 million of Fiscal 2025 Subseries AA-2, saw 5s of 6/2030 at 2.44% (-5), 5s of 2046 at 3.66% (-2) and 5s of 2049 at 3.78% (-3), callable 12/15/2034.
BofA Securities priced for Lee County, Florida, (A2//A/AA-) $525.51 million of AMT airport revenue bonds, Series 2024, with 5s of 10/2034 at 3.63%, 5.25s of 2039 at 3.85%, 5.25s of 2044 at 4.15%, 5.25s of 2049 at 4.29%, 5.25s of 2054 at 4.35% and 5.25s of 2054 at 4.27% (AGM insured), callable 10/1/2034.
Morgan Stanley priced for the Board of Regents of the University of Texas System (Aaa/AAA/AAA/) $535.535 million of revenue financing system refunding bonds, Series 2024B, saw 5s of 9/2029 at 2.44%, 5s of 2033 at 2.79%, 5s of 2039 at 3.11%, 5s of 2042 at 3.34% and 4s of 2054 at 4.13%, callable 8/15/2034.
Wells Fargo priced for Sacramento County (A2/A+//) $469.12 million of non-AMT airport system senior revenue bonds, Series 2024, with 5s of 7/2028 at 2.25%, 5s of 2029 at 2.25%, 5s of 2034 at 2.69%, 5s of 2039 at 3.04%, 5s of 2044 at 3.48%, 5s of 2049 at 3.70%, 5.25s of 2049 at 3.65%, 5s of 2054 at 3.80% and 5.25s of 2054 at 3.75%, callable 7/1/2034.
Goldman Sachs priced for the New York Power Authority (Aa1/AA/AA/AA+) an upsized
Piper Sandler priced for St. Cloud, Minnesota, (A2//AA-/) $308.065 million of CentraCare Health System healthcare revenue bonds, Series 2024, with 5s of 5/2031 at 2.85%, 5s of 2034 at 3.10%, 5s of 2039 at 3.39%, 5s of 2044 at 3.78%, 4s of 2050 at 4.15% and 5s of 2054 at 4.06%, callable 5/1/2034.
BofA Securities priced for the City and County of Denver (Aaa/AAA//) $254.4 million of water revenue refunding bonds, Series 2024A, with 5s of 9/2025 at 2.53%, 5s of 2029 at 2.36%, 5s of 2034 at 2.77%, 5s of 2039 at 3.03%, 5s of 2044 at 3.40%, 5s of 2049 at 3.60% and 5s of 2054 at 3.71%, callable 9/15/2034.
In the competitive market, the Kansas Development Finance Authority (Aaa//AAA/) sold sell $263.4 million of Kansas Department of Health and Environment revolving funds revenue bonds, Series 2024SRF, to BofA Securities, with 5s of 5/2025 at 2.79%, 5s of 2029 at 2.40%, 5s of 2034 at 2.73%, 5s of 2039 at 3.07% and 5s of 2044 at 3.43%, callable 5/1/2034.
Jefferson County School District, Kentucky, (/AA//) sold $139.19 million of GOs to Mesirow Financial, with 5s of 9/2025 at 2.63%, 5s of 2029 at 2.51%, 4s of 2034 at 3.10%, 4s of 2039 at 3.67% and 4s of 2044 at 3.96%, callable 3/1/2032.
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 cut up to two basis points: 2.53% (unch) in 2025 and 2.32% (+1) in 2026. The five-year was at 2.33% (+1), the 10-year was at 2.62% (+1) and the 30-year was at 3.51% (+1) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.50% in 2025 and 2.32% in 2026. The five-year was at 2.32%, the 10-year was at 2.59% and the 30-year yield was at 3.50% at 3 p.m.
Bloomberg BVAL was cut up to two basis points: 2.43% (unch) in 2025 and 2.38% (unch) in 2026. The five-year at 2.37% (unch), the 10-year at 2.61% (unch) and the 30-year at 3.50% (+2) at 3:30 p.m.
Treasuries were firmer.
The two-year UST was yielding 3.539% (-5), the three-year was at 3.440% (-5), the five-year at 3.473% (-3), the 10-year at 3.733% (-2), the 20-year at 4.128% (-1) and the 30-year at 4.089% (flat) at the close.
Primary calendar:
The Texas Water Development Board (/AAA/AAA/) is set to price Thursday $1.258 billion of state water implementation revenue fund master trust revenue bonds, Series 2024A, serials 2025-2037, terms 2038, 2039, 2040, 2041, 2042, 2043, 2044, 2049, 2054, 2059. BofA Securities
The Texas Water Development Board is also set to price Wednesday $362.465 million of taxable state water implementation master trust revenue taxable bonds, serials 2025-2039, terms 2044, 2054. 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.
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 Wednesday $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 Industrial Development Authority of the City of Sierra Vista, Arizona, is set to price Wednesday $208.665 million of nonrated American Leadership Academy education facility revenue bonds, Series 2024, terms 2034, 2039, 2044, 2049, 2054, 2059, 2064. Baird.
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 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.
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 Wednesday $100 million of unlimited tax school building bonds, PSF guaranteed, serials 2025-2049. Loop Capital Markets.
Competitive:
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.
