Munis mixed ahead of smaller new-issue calendar

Municipals were mixed Friday ahead of a smaller new-issue calendar. U.S. Treasuries cheapened and equities ended down.

The two-year muni-UST ratio Friday was at 67%, the five-year at 68%, the 10-year at 75% and the 30-year at 92%, according to Municipal Market Data’s 3 p.m. ET read. ICE Data Services had the two-year at 67%, the five-year at 69%, the 10-year at 74% and the 30-year at 93% at 4 p.m.

This week’s inflation print numbers continued “trending down,” consequently showing no “meaningful effects” from the tariffs, said Barclays strategists led by Mikhail Foux.

“Meanwhile, economic activity has continued to slow, and Treasury rates have responded positively to lower inflation and slower growth, dropping 10-15bp this week, with the yield curve slightly bull-steepening,” they said.

Long- and medium-dated tax-exempts have lagged the rally, but the front end has done better, Barclays strategists said.

The steepness of the Treasury curve can partially explain the current steepness of muni curves, they said.

“In the aftermath of the muni selloff in early April, tax-exempt curves became much flatter than Treasury curves, but they have continued to steepen since then as the market has continued to recover,” Barclays strategists said.

“Coming on the heels of a strong volume year in 2024, supply for 2025 is running about 15%-20% ahead of last year,” said Jeff Lipton, a market strategist.

This is due to concerns over the tax exemption, the need to address deferred maintenance and the near depletion of federal stimulus money, he said.

Issuance, though, takes a bit of a breather next week due to the Juneteenth holiday and the Federal Open Market Committee meeting, Barclays strategists said.

Over the summer, supply should remain healthy, but slow down from the rapid pace of issuance seen in the past couple of months, they said.

“In that case, the muni market should remain supported, especially if rates continue to be well behaved, as we expect; they will also likely benefit due to a flight to quality as a result of the geopolitical concerns in the Middle East,” Barclays strategists said. “As a result, we remain sanguine on the muni market outlook, as MMD-UST ratios will likely increase if UST rates rally.”

The muni market “remains closely tethered to evolving fiscal policy directives to the point where monetary policy serves as a secondary backdrop ahead of next week’s FOMC meeting,” Lipton said.

The Fed is “likely to hold rates steady with an indication that further clarity is needed on the tariff and inflation front,” as the possibility of one to two rate cuts this fall increases.

“It is these policy unknowns that are driving protracted market volatility with tariffs, taxes, and specific sector-related challenges at the epicenter,” he said. “As a result, muni yields are broadly higher today (except for the ultra short end) than at the beginning of the year.”

Muni spreads, in general, have not moved meaningfully so far this year, but there has been more widening across “the lower IG private higher education and hospital sectors, as well as for some lower quality airports,” he said.

New-issue calendar
Issuance for the week of June 16 is estimated at $6.09 billion, with $4.725 billion of negotiated deals and $1.365 billion of competitive deals on tap, according to LSEG.

The San Diego Regional Airport Authority leads the negotiated calendar with $835.495 million of senior airport revenue bonds.

The competitive calendar is led by New Mexico with $237.82 million of severance tax bonds.

AAA scales
MMD’s scale was mixed: The one-year was at 2.66% (-4) and 2.66% (-2) in two years. The five-year was at 2.75% (-2), the 10-year at 3.32% (unch) and the 30-year at 4.54% (+1) at 3 p.m.

The ICE AAA yield curve was cut up to two basis points: 2.73% (unch) in 2026 and 2.64% (unch) in 2027. The five-year was at 2.76% (+1), the 10-year was at 3.24% (+2) and the 30-year was at 4.50% (+2) at 4 p.m.

The S&P Global Market Intelligence municipal curve saw bumps five years and in: The one-year was at 2.71% (-4) in 2025 and 2.65% (-4) in 2026. The five-year was at 2.74% (-3), the 10-year was at 3.32% (unch) and the 30-year yield was at 4.53% (unch) at 4 p.m.

Bloomberg BVAL was little changed: 2.67% (-1) in 2025 and 2.69% (-1) in 2026. The five-year at 2.79% (-1), the 10-year at 3.27% (unch) and the 30-year at 4.50% (unch) at 4 p.m.

Treasuries were weaker.

The two-year UST was yielding 3.953% (+4), the three-year was at 3.913% (+4), the five-year at 4.013% (+5), the 10-year at 4.415% (+5), the 20-year at 4.926% (+7) and the 30-year at 4.906% (+6) near the close.

Primary to come
The San Diego County Regional Airport Authority (Aa3/NR/AA-/) is set to price Tuesday $835.495 million of senior airport revenue bonds, consisting of $163.165 million of Series 2025A governmental/non-AMT bonds and $672.33 million of Series 2025B private activity/AMT bonds. BofA Securities.

The Great Lakes Water Authority is set to price Tuesday $492.07 million of water supply system revenue and revenue refunding bonds, consisting of $198.8 million of Series A revenue refunding senior lien bonds (Aa3/AA-/A+/), $71.81 million of Series B revenue refunding second lien bonds (A1/A+/A/), $110.84 million of Series C revenue senior lien bonds (Aa3/AA-/A+/), and $110.62 million of Series D revenue second lien bonds (A1/A+/A/). Siebert Williams Shank.

Riverside County is set to price Tuesday $450 million of non-rated 2025 tax and revenue anticipation notes. J.P. Morgan.

The Great Lakes Water Authority is set to price Tuesday $393.49 million of sewage disposal system revenue and revenue refunding bonds, consisting of $74.795 million of Series A revenue refunding senior lien bonds (Aa3/AA-/AA/), $270.58 million of Series B revenue refunding second lien bonds (A1/A+/AA-/), and $48.115 million of Series C revenue second lien bonds. Siebert Williams Shank.

The Dormitory Authority of the State of New York (Aa3//A+/) is set to price Tuesday $340.755 million of State University of New York dormitory facilities revenue bonds, consisting of $152.665 million of Series A sustainability bonds and $188.09 million of Series B bonds. BofA Securities.

The El Paso County Hospital District, Texas, (///AA+/) is set to price Tuesday $265.455 million of Assured Guaranty-insured GOs. J.P. Morgan.

The New York State Housing Finance Agency (Aa2///) is set to price Tuesday $254.98 million of multi-family affordable housing revenue bonds, consisting of $55.915 million of Series B-1, $56.825 million of Series B-2, $89.52 million of Series B-3 and $52.72 million of Series B-4. Barclays.

The Pennsylvania Economic Development Financing Authority is set to price Tuesday $250 million of Noble Environmental bonds. Fifth Third Securities.

The New York City Housing Development Corp. (Aa2///) is set to price Tuesday $248.43 million of sustainable development housing impact bonds, consisting of $85 million of Series A bonds and $163.43 million of Series B taxable bonds. Wells Fargo.

The Iowa Finance Authority (Aaa//AAA/) is set to price Tuesday $200.42 million of state revolving fund revenue bonds, consisting of $164.935 million of Series C green bonds and $35.485 million of Series D taxable bonds. RBC Capital Markets.

The Douglas County Hospital Authority No. 3, Nebraska, (/A/A+/) is set to price Tuesday $129.205 million of Nebraska Methodist Health System health facilities revenue bonds. RBC Capital Markets.

Tallahassee (Aa3/AA//) is set to price Tuesday $109.045 million of energy system refunding revenue bonds. Goldman Sachs.

Competitive
New Mexico is set to sell $237.82 million of severance tax bonds, Series 2025A, at 10 a.m. Eastern Tuesday.

The Sacramento Metropolitan Fire District, California, is set to sell $160 million of Election of 2024 GOs, Series A, at noon Monday.

Olathe, Kansas, is set to sell $155 million of GO temporary notes at 10:30 a.m. Tuesday.