$10B calendar, higher yields and better valuations to greet investors
5 min read
Municipals improved Friday after a volatile week for the asset class, ignoring losses in U.S. Treasuries, while equities closed the week mixed.
Investors will see higher yields and ratios along with a nearly $11 billion new-issue slate for the final week of the month and the last ahead of the election.
Triple-A yields fell three to seven basis points with the largest gains out long while govies saw losses of four basis points across the curve.
Muni-UST ratios fell slightly on the day’s moves. The two-year ratio Friday was at 65%, the three-year at 64%, the five-year at 65%, the 10-year at 70% 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 65%, the five-year at 66%, the 10-year at 71% and the 30-year at 84% at 4 p.m.
After pulling the deal earlier this week, Morgan Stanley on Friday brought the California Community Choice Financing Authority’s (A1///) $1.243 billion of green Clean Energy Project revenue bonds, Series 2024E, pricing the deal with 5s of 9/2027 at 3.34%, 5s of 3/2029 at 3.50%, 5s of 9/2029 at 3.50%, 5s of 3/2032 at 3.86%, 5s of 9/2032 at 3.87% and 5s of 2/2055 with a mandatory put date of 9/1/2032 at 3.92%, callable 6/1/2032.
While Wednesday’s session swiftly pushed yields higher by as much as 18 basis points, the moves pushed investors to jump into the market, with the demand pushing yields down again and new-issues that priced earlier in the week traded up in the secondary.
“We believe investors will be very happy with purchases made in the context of current market levels as we move through 2025, given our view that the Fed is in the early stages of an easing cycle and that the general direction of UST rates is lower next year,” said Peter DeGroot, managing director and head of the investment bank’s municipal research and strategy team at J.P. Morgan.
The market could not hold any longer “and finally cracked,” said Barclays strategist Mikhail Foux.
“It started gradually, but midweek it felt like a capitulation trade to us — ratios have moved up … and bid-wanted volume has spiked, although there was very little trading activity as investors have become quite cautious, which is hardly surprising,” he said.
Meanwhile, he noted “dealer balance sheets have continued to swell, leaving them less breathing room to support the market.”
Issuance for next week is at an estimated $10.8 billion led by Wisconsin with $1.55 billion of GOs, followed by the Pennsylvania Higher Education Facilities Authority with $1.1 billion of Thomas Jefferson University revenue bonds and $860 million of University of Miami issue revenue and refunding bonds from the Miami-Dade Education Facilities Authority.
California leads the competitive calendar with $852.405 million of tax-exempt and taxable various purpose GOs.
The current sell-off “presents an opportunity, and we would be happy to add at cheaper levels” going into the November elections, Foux said.
Munis have started pricing in the possible effect of a red wave, he said, “and if one indeed comes to pass, the market reaction might be less pronounced.
“Even though it does not feel to us that the correction is over — we would need to see rate stabilization first, we are inclined to start dipping in our toes, as we believe that the muni market should still perform relatively well at the end of 2024, regardless of the presidential outcome — to us it is just a matter of locating a better entry point,” Foux said.
DeGroot said J.P. Morgan expects the end of next week “will mark the end of the difficult technical period in 2024 and believe that net supply in November (negative $8 billion including calls) will lead to better valuations broadly in the municipal market.”
Bond Buyer 30-day visible supply sits at $14.52 billion.
AAA scales
Refinitiv MMD’s scale was bumped three to seven basis points: The one-year was at 2.83% (-3) and 2.65% (-3) in two years. The five-year was at 2.64% (-3), the 10-year at 2.97% (-6) and the 30-year at 3.82% (-7) at 3 p.m.
The ICE AAA yield curve was bumped two to seven basis points: 2.94% (-2) in 2025 and 2.70% (-3) in 2026. The five-year was at 2.65% (-3), the 10-year was at 3.97% (-5) and the 30-year was at 3.76% (-2) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was bumped: The one-year was at 2.87% (-3) in 2025 and 2.68% (-3) in 2026. The five-year was at 2.67% (-3), the 10-year was at 2.95% (-4) and the 30-year yield was at 3.76% (-6) at 4 p.m.
Bloomberg BVAL was unchanged: 2.83% in 2025 and 2.64% in 2026. The five-year at 2.67%, the 10-year at 2.99% and the 30-year at 3.79% at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 4.105% (+4), the three-year was at 4.048% (+4), the five-year at 4.063% (+4), the 10-year at 4.244% (+4), the 20-year at 4.587% (+4) and the 30-year at 4.50% (+3) at the close.
Primary to come
Wisconsin (Aaa/AA+/AA+/) is set to price Wednesday $1.55 billion of general obligation bonds consisting of $886.245 million of various purpose GO refunding bonds, serials 2025-2039, and $664.155 million of motor vehicle fuel tax and vehicle related fees GO refunding bonds, serials 2025-2039, 2042. BofA Securities.
The Pennsylvania Higher Educational Facilities Authority (A3/A/A/) is set to price Wednesday $1.107 billion of Thomas Jefferson University revenue bonds, consisting of $655 million of Series 2024B-1 fixed rate revenue bonds, $285 million of Series 2024B-2 and $168 million of taxable revenue refunding bonds. J.P. Morgan Securities LLC.
The Miami-Dade County Educational Facilities Authority (A2/A-//) is set to price Tuesday $860 million of university revenue and refunding bonds, consisting of $552 million of Series A, serials 2025-2048, $308 million of Series B, 2030-2045. Barclays Capital Inc.
The New Orleans Aviation Board (A2//A/) is set to price Wednesday $597.4 million of general airport revenue refunding bonds, AMT, non-AMT and taxable. BofA Securities
The Virginia Housing Development Authority (Aaa/AAA//) is set to price Tuesday $455.48 million of commonwealth mortgage bonds, non-AMT and taxables. Wells Fargo Bank, N.A. Municipal Finance Group.
Atlanta (Aa3/A+//) is set to price Tuesday $383.51 million of water and wastewater subordinate lien sustainability revenue bonds. J.P. Morgan Securities LLC.
The Harris County Houston Sports Authority (A2/AA//) is set to price Tuesday $329.68 million of senior lien and second lien refunding bonds, insured by Assured Guaranty. Wells Fargo Bank, N.A. Municipal Finance Group.
The Katy Independent School District, Texas, (Aaa/AAA//) is on the day-to-day calendar with $220.28 million of unlimited tax refunding bonds, PSF. BOK Financial Securities, Inc.
The Indiana Housing and Community Development Authority (Aaa//AA+/) is set to price Tuesday $198.62 million of single family non-AMT, AMT and taxable social revenue bonds. J.P. Morgan Securities LLC
The School District of Pasco County, Florida, (Aa3//AA/) is set to price Tuesday $197.195 million of sales tax revenue bonds. BofA Securities.
The Build NYC Resource Corp. is set to price Tuesday $150 million of Success Academy Charter Schools Project revenue bonds. PNC Capital Markets LLC.
The Nebraska Investment Finance Authority (/AAA//) is set to price Wednesday $130.51 million of non-AMT and taxable single-family housing revenue bonds. J.P. Morgan Securities LLC.
The Brownsburg 1999 School Building Corp., Indiana, (/AA+//) is set to price Tuesday $120.36 million of ad valorem property tax first mortgage bonds, insured by Indiana State Aid Intercept Program. Stifel, Nicolaus & Company, Inc.
The Maine State Housing Authority (Aa1/AA+//) is set to price Tuesday (retail Monday) $110 million of mortgage purchase social bonds. Barclays Capital Inc.
The Atlanta Urban Redevelopment Agency (Aa1//AAA/) is set to price Wednesday $103.735 million of surface transportation and infrastructure projects revenue bonds. Ramirez & Co., Inc.
