July 22, 2025

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Muni yields fall after last week’s selloff

6 min read
Muni yields fall after last week's selloff

Municipals were firmer Monday following the muni market’s largest selloff since the tariff-induced volatility of mid-April, and munis gave back nearly all of their July gains. U.S. Treasury yields fell and equities ended up.

The two-year muni-UST ratio Monday was at 64%, the five-year at 66%, the 10-year at 76% and the 30-year at 96%, according to Municipal Market Data’s 3 p.m. ET read. ICE Data Services had the two-year at 62%, the five-year at 66%, the 10-year at 74% and the 30-year at 93% at a 4 p.m. read.

Municipal yields fell up to five basis points Monday, depending on the curve, though it’s not enough to undo the damage from last week.

Last week, the AAA MMD curve underperformed across all maturities but saw the heaviest losses out long as the 30-year rose by 22 basis points, said Birch Creek strategists.

“As July reinvestment capital had mostly been spent, the market was hit with a deluge of new issuance after the primary calendar topped out at more than $16 billion in deals,” they said, noting the influx of volume came just as duration-induced losses led to fund outflows.

Muni mutual funds saw outflows of $224.6 million, mostly from investment-grade funds, which lost $259 million, according to LSEG Lipper.

This led to an uptick in bids wanteds with J.P. Morgan reporting an 18% increase relative to recent averages, which proved difficult for the market to absorb, Birch Creek strategists said.

“In many cases, bonds were trading 10-20 bps behind evals,” they said.

The primary market saw “decent subscriptions,” but the entire primary calendar came at “healthy concessions to where evals had been marked on existing bonds,” Birch Creek strategists said.

By the end of last week, several inquiries emerged as ultra-high grade 5s broke past par, such as a New York income tax competitive deal, which was bought using 5s at 5.10% in the 30-year maturity, they said.

Between rising rates in July, heavy supply last week and low seasonal investment, investors are opting to either hold back or lean more toward the front end.

“With rates rising overall this month due to dwindling expectations that a rate cut could happen in September due to [the consumer price index] coming in higher than expected … investors are being more cautious by staying on the sidelines or focusing on the front end,” said Jason Wong, vice president of municipals at AmeriVet Securities.

However, a “challenging technical environment continues to weigh on the longer end of the curve,” said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

But crossover interest will help the “pain” stop on the long end, he said.

“As yields become more attractive, interest from nontraditional municipal buyers starts to increase, as they can purchase AA-rated municipal bonds at better yields relative to U.S. Treasuries of a similar maturity,” Clements said, noting this helps “set a ceiling” on how much muni yields can rise versus Treasuries.

Along with that, short yields continue to fall, which may eventually drive investors to push further out the curve, he said.

AAA scales
MMD’s scale was bumped one to four basis points: The one-year was at 2.45% (-1) and 2.45% (-1) in two years. The five-year was at 2.59% (-1), the 10-year at 3.34% (-1) and the 30-year at 4.73% (-4) at 3 p.m.

The ICE AAA yield curve was bumped up to five basis points: 2.46% (unch) in 2026 and 2.42% (unch) in 2027. The five-year was at 2.60% (-1), the 10-year was at 3.28% (-2) and the 30-year was at 4.65% (-5) at 4 p.m.

The S&P Global Market Intelligence municipal curve was bumped one to three basis points: The one-year was at 2.45% (-1) in 2025 and 2.46% (-1) in 2026. The five-year was at 2.59% (-1), the 10-year was at 3.35% (-1) and the 30-year yield was at 4.73% (-3) at 4 p.m.

Bloomberg BVAL was bumped one to four basis points: 2.45% (-1) in 2025 and 2.47% (-1) in 2026. The five-year at 2.58% (-1), the 10-year at 3.32% (-2) and the 30-year at 4.71% (-4) at 4 p.m.

Treasuries saw gains.

The two-year UST was yielding 3.85% (-2), the three-year was at 3.801% (-4), the five-year at 3.905% (-4), the 10-year at 4.369% (-5), the 20-year at 4.927% (-6) and the 30-year at 4.937% (-5) just before the close.

Primary to come
The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price Wednesday $1.5 billion of future tax secured tax-exempt subordinate bonds, Fiscal 2026 Series A, Subseries A-1. Ramirez.

The Tarrant County Cultural Education Facilities Finance Corp. (Aa2/AA//) is set to price Thursday $703.465 million of Texas Health Resources System revenue bonds. Morgan Stanley.

The Snohomish County Public Utility District, Washington, (Aa2/AA/AA/) is set to price Thursday $387.545 million of electric system revenue and refunding bonds. Raymond James.

The Peace River Manasota Regional Water Supply Authority, Florida, (/AA/AA/) is set to price Tuesday $369.71 million of new-issue and refunding utility system revenue bonds. Raymond James.

The Illinois Housing Development Authority (Aaa///) is set to price Thursday $350 million of social revenue bonds. RBC Capital Markets.

The Idaho Housing and Finance Association (Aa1///) is set to price Tuesday $325 million of non-AMT and taxable single family mortgage bonds. RBC Capital Markets.

The Spring Branch Independent School District, Texas, is set to price Thursday $323.92 million of unlimited tax school building and refunding bonds. Piper Sandler.

The Guam Waterworks Authority (Baa2/A-//) is set to price Tuesday $267.075 million of water and wastewater system revenue bonds. RBC Capital Markets.

The Sherman Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $226.29 million of PSF-insured unlimited tax school building bonds. Raymond James.

The District of Columbia Water and Sewer Authority (Aa2/AA+/AA/) is set to price Tuesday $216.335 million of public utility subordinate lien revenue and revenue refunding bonds. Siebert Williams Shank.

The Forney Independent School District, Texas, (/AAA//) is set to price Tuesday $204.725 million of PSF-insured unlimited tax school building and refunding bond. FHN Financial.

The Florida Local Government Finance Commission is set to price Tuesday $202.595 million of senior living revenue bonds (The Convivial Jacaranda Trace Project). Ziegler.

The Florida Local Government Finance Commission (Ba1///) is set to price Thursday $201.29 million of educational facilities revenue bonds (Bridgeprep Academy Projects). HJ Sims.

The Cobb-Marietta Coliseum and Exhibit Hall Authority (Aa2/AA-//) is set to price Tuesday $188.92 million of revenue bonds (Cobb Galleria Centre Project). BofA Securities.

The Oklahoma Water Resources Board (/AAA/AAA/) is set to price Tuesday $175 million of Revolving Fund revenue bonds – Clean Water Program. Raymond James.

The San Bernardino Community College District, California, (Aa1/AA//) is set to price Tuesday $165.823 million of GOs. Piper Sandler.

The Nash Health Care Systems (/BBB+/A-/) is set to price Tuesday $154.06 million of health care facilities revenue bonds. Wells Fargo.

The Maine Governmental Facilities Authority (Aa2/AA-//) is set to price Tuesday $150 million of lease rental revenue bonds. BofA Securities.

The Southwestern Community College District, California, (Aa2///) is set to price Tuesday $120 million of GOs. Raymond James.

The East Allen Multi School Building Corp. (/AA+//) is set to price Wednesday $120 million of ad valorem property tax first mortgage bonds. Stifel.

The Sierra Vista Industrial Development Authority is set to price Tuesday $110.215 million of nonrated education facility revenue bonds (Wake Preparatory Academy). Baird.

The Alvin Independent School District, Texas, (Aaa//AAA/) is set to price Wednesday $103.16 million of PSF-insured unlimited tax schoolhouse bonds.

The San Mateo-Foster City School District, California, (Aaa///) is set to price Thursday $100 million of GOs. Stifel.

Competitive
Maui County, Hawaii, is set to sell $301.81 million of GOs at 11:30 a.m. Eastern Wednesday.

Denton, Texas, is set to sell $234.265 million of certificates of obligation at 10:45 a.m. Wednesday.

The Freehold Township Board of Education, New Jersey, is set to sell $135.468 million of school bonds at 11 a.m. Thursday.

Frank Gargano contributed to this story.