Munis steady as upcoming issuance falls to $2.5B

Municipals were steady ahead of a lackluster new-issue calendar due to the holiday-shortened week. U.S. Treasury yields rose and equities ended higher, the the S&P 500 and Nasdaq setting record highs.

The two-year muni-UST ratio Friday was at 69%, the five-year at 70%, the 10-year at 77% and the 30-year at 94%, according to Municipal Market Data’s 3 p.m. ET read. ICE Data Services had the two-year at 67%, the five-year at 70%, the 10-year at 75% and the 30-year at 94% at 4 p.m.

June’s supply is expected to be the largest monthly issuance for 2025 at over $50 billion, according to LSEG data.

As a result, tax-exempts — which have been affected by the heavy issuance — “have underperformed this month, while Treasuries rallied, with muni ratios moving up 2pp for 10y and 4pp for 30y bonds,” said Barclays strategists Mikhail Foux, Grace Cen and Francisco San Emeterio.

The record pace of issuance has led several firms to revise their supply projections upward for the year, including BofA Securities, which increased its forecast to $580 billion from $520 billion.

This revision is “right on track” as issuance for the first half of the year is around $275 billion, BofA strategists said.

In the second half of the year, they expect “another $308bn of issuance against $337bn of principal redemptions and coupon payments.”

Barclays strategists, however, expect issuance to fall 10% in the second half of the year from first half levels.

The muni market tends to perform well in July — both outright and compared to USTs, Barclays strategists said.

“Even excluding the COVID year, when tax-exempts continued to recover after the selloff, MMD-UST ratios have declined 2pp in July on average and have sold off 3pp in August,” they said, noting it’s probable that August turns out better than normal, if supply takes a bit of a “breather.”

In July and August, “supply/demand market technicals should be strong … as large issuance will be met by higher redemptions and coupon payments,” BofA strategists said. “By September and October, we expect technicals to weaken, with issuance above anticipated redemptions and coupon payments.”

“We think the market is in a good position, as munis have meaningfully underperformed in 1H25 and remain the only fixed income asset class with negative total returns YTD,” Barclays strategists said.

“We see good value at current valuations (both relative and absolute), supply should start abating to some degree … we are not overly concerned about rates and investors should be getting longer going into 2H25, as performance this year will likely be back-loaded,” they said.

New-issue calendar
Issuance for the week of June 30 is estimated at $2.495 billion, with $2.039 billion of negotiated deals and $456.3 million of competitive deals on tap, according to LSEG.

The Massachusetts Bay Transportation Authority leads the negotiated calendar with $939.22 million of senior sales tax bonds

The competitive calendar is led by Roswell, Georgia, with $93.4 million of GOs.

AAA scales
MMD’s scale saw was bumped up to two basis points: The one-year was at 2.58% (unch) and 2.59% (unch) in two years. The five-year was at 2.68% (-2), the 10-year at 3.28% (-1) and the 30-year at 4.54% (unch) at 3 p.m.

The ICE AAA yield curve was bumped up to one basis point: 2.59% (unch) in 2026 and 2.51% (-1) in 2027. The five-year was at 2.67% (-1), the 10-year was at 3.19% (unch) and the 30-year was at 4.50% (unch) at 4 p.m.

The S&P Global Market Intelligence municipal curve was bumped up to two basis points: The one-year was at 2.58% (-1) in 2025 and 2.59% (-1) in 2026. The five-year was at 2.67% (-2), the 10-year was at 3.27% (-2) and the 30-year yield was at 4.53% (unch) at 4 p.m.

Bloomberg BVAL was bumped up to one basis point: 2.59% (unch) in 2025 and 2.61% (unch) in 2026. The five-year at 2.71% (-1), the 10-year at 3.20% (-1) and the 30-year at 4.47% (unch) at 4 p.m.

Treasuries saw losses.

The two-year UST was yielding 3.745% (+3), the three-year was at 3.718% (+3), the five-year at 4.833% (+4), the 10-year at 4.284% (+4), the 20-year at 4.845% (+4) and the 30-year at 4.846% (+5) just before the close.

Primary to come
The Massachusetts Bay Transportation Authority (/AA+/AAA/AAA/) is set to price Wednesday $939.22 million of senior sales tax bonds, 2025 Series B, serials 2029-2045, terms 2050, 2055. Barclays.

The Los Angeles Unified School District (Aa3//AA-/) is set to price Tuesday $308.17 million of taxable judgment obligation refunding bonds, Series 2025A, serials 2026-2040. RBC Capital Markets.

The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price Tuesday $197.63 million of taxable single-family mortgage bonds Class I, 2025 Series L-1, serials 2027-2037, terms 2033, 2040, 2042, 2056. RBC Capital Markets

Competitive
Roswell, Georgia, is set to sell $93.4 million of GOs at noon Monday.

Alex Walters contributed to this story.