Munis see 4th consecutive session of losses; ICI reports $1.4B of fund inflows
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Municipals were slightly weaker Wednesday for the fourth consecutive session following more losses in U.S. Treasuries while equities made gains.
Muni yields were cut up to three basis points, depending on the scale, while UST yields rose four to five basis points, pushing the two-year UST yield above 4% for the first time since late August.
The two-year muni-to-Treasury ratio Wednesday was at 61%, the three-year at 60%, the five-year at 62%, the 10-year at 67% and the 30-year at 84%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 63%, the three-year at 62%, the five-year at 63%, the 10-year at 68% and the 30-year at 84% at 4 p.m.
The Investment Company Institute reported $1.484 billion of
This marks nine consecutive weeks of inflows and four straight weeks of inflows topping $1 billion.
Exchange-traded funds saw $810 million of inflows after $109 million of inflows the previous week.
With munis establishing “directional footing” in the fourth quarter of this year, the technical backdrop is still the market driver for 2024, said Jeff Lipton, a research analyst and market strategist.
“While we can cite waning stimulus, active refinancing of Build America Bonds by way of a material event-driven redemption provision, and less anxiety over monetary policy, issuers have clearly been front-loading their deals ahead of next month’s presidential election which has catapulted tax-exempt supply,” he said.
There has been a rapid pace of issuance over the past several months, with the new normal becoming weekly supply above $10 billion outside of holiday-shortened and Federal Open Market Committee meeting weeks.
“Supply should be well digested, although with relative valuations becoming slightly more expensive, investors could be a bit more selective,” said Daryl Clements, a municipal portfolio manager at AllianceBernstein.
Ahead of the election, supply may “subside” before resuming during the final weeks of 2024, according to Lipton.
“While recent economic data points may be supportive of the Fed’s more measured pathway to lower rates than what the bond market perhaps initially anticipated,” the UST market sold off through Monday, he said.
“Nevertheless, robust demand, underscored by October reinvestment needs and attractive ratios with compelling absolute yields, have propelled muni mutual fund allocations, retracing some of the underperformance,” Lipton said.
With “still-ample supply and contained reinvestment needs” through the rest of Q4, buying opportunities may appear in the near-term as ratios cheapen up, he said.
“While certain institutional investor classes may be predominately drawn to relative value, retail buyers can be attracted to taxable equivalent yield calculations,” Lipton said.
In the primary market Wednesday, Siebert Williams Shank priced for institutions $935 million of GOs for Connecticut (Aa3/AA-/AA-/AA+/), with cuts from Tuesday’s retail pricing. The first tranche, $560 million of Series F bonds, saw 5s of 11/2025 at 2.85% (+11), 5s of 2029 at 2.61% (+7), 5s of 2034 at 2.99% (+8) and 5s of 2038 at 3.23% (+9), callable 11/15/2034.
The second tranche, $240 million of social Series G bonds, saw 5s of 11/2039 at 3.29% (+7) and 5s of 2044 at 3.63% (+2), callable 11/15/2034.
The third tranche, $135 million of refunding Series H bonds, saw 5s of 11/2025 at 2.85% (+11), 5s of 2029 at 2.61% (+7) and 5s of 2034 at 2.99% (+8) callable 11/15/2034.
Jefferies priced for the New York State Housing Finance Agency (Aa1///) is set to price Wednesday $259.64 million of state personal income tax sustainability revenue bonds. The first tranche, $$74.625 million of 2024 Series A-1, saw 5s of 12/2027 at 2.56%, 5s of 6/2029 at 2.66%, 5s of 12/2029 at 2.71%, 5s of 12/2034 at 3.20%, 5s of 12/2039 at 3.47%, 5s of 12/2044 at 3.87%, 5s of 12/2049 at 4.09% and 5s of 6/2054 at 4.16%, callable 12/15/2031.
The second tranche, $185.015 million of 2024 Series A-2, saw all bonds priced at par: 3.35s of 6/2054 with a put/tender date of 6/15/2029, callable 4/15/2027, and 3.45s of 6/2054 with a put/tender date of 6/15/2030, callable 12/15/2028.
Morgan Stanley priced for the Arizona Board of Regents (Aa3/A+//) $116.315 million of BAM-insured University of Arizona SPEED revenue refunding bonds, with 5s of 8/2025 at 3.03%, 5s of 2029 at 2.62%, 5s of 2034 at 3.04%, 5s of 2039 at 3.32% and 5s of 2044 at 3.69%, callable 8/1/2034.
AAA scales
Refinitiv MMD’s scale was cut one basis point: The one-year was at 2.68% (+1) and 2.44% (+1) in two years. The five-year was at 2.41% (+1), the 10-year at 2.73% (+1) and the 30-year at 3.66% (+1) at 3 p.m.
The ICE AAA yield curve was cut two to three basis points: 2.73% (+2) in 2025 and 2.49% (+2) in 2026. The five-year was at 2.44% (+3), the 10-year was at 2.73% (+2) and the 30-year was at 3.62% (+2) at 3 p.m.
The S&P Global Market Intelligence municipal curve was cut up to two basis points: The one-year was at 2.73% (+1) in 2025 and 2.46% (+1) in 2026. The five-year was at 2.41% (+2), the 10-year was at 2.72% (+2) and the 30-year yield was at 3.61% (unch) at 3 p.m.
Bloomberg BVAL was cut one to two basis points: 2.72% (+1) in 2025 and 2.47% (+2) in 2026. The five-year at 2.43% (+2), the 10-year at 2.69% (+2) and the 30-year at 3.62% (+2) at 3 p.m.
Treasuries saw losses.
The two-year UST was yielding 4.005% (+5), the three-year was at 3.913% (+5), the five-year at 3.902% (+5), the 10-year at 4.062% (+4), the 20-year at 4.409% (+4) and the 30-year at 4.338% (+4) at 3:30 p.m.
Primary to come
The Cabarrus County Development Corp., North Carolina, (Aa1/AA+/AA+/AA+) is set to price Thursday $238.305 million of limited obligation refunding bonds, serials 2025-2044. BofA Securities.
Competitive
Clark County School District, Nevada, (A1/AA-//) is set to sell $400 million of limited tax general obligation bonds at 11:30 a.m. eastern Thursday.
