Long-end munis struggle to recover

Municipals were a touch firmer in spots as U.S. Treasury yields fell and equities ended mixed.

The two-year muni-UST ratio Tuesday was at 64%, the five-year at 67%, the 10-year at 77% 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 75% and the 30-year at 94% at a 4 p.m. read.

The muni market feels a bit soft, and the long-end in particular feels a bit “orphaned,” said Adam Congdon, a director at Payden & Rygel.

There was material steepening in the muni curve, along with the UST curve, and munis have underperformed, he said.

Ten- and 30-year ratios have returned to levels that haven’t been seen in some time, Congdon said.

Long-end munis are an outlier compared to the recovery of most other financial markets from the tariff-induced volatility of April, he noted. They are seeing large losses (+22), with returns at negative 2.09% month-to-date and negative 5.40% year-to-date.

The massive influx of supply is partly to blame, as this year is on pace for another record year of issuance, according to Congdon.

There is a buyer base that is a little bit “skeptical” of longer maturities, but it’s more of a retail response, he said.

“You don’t have as much [asset/liability management] type of demand out long, so you’ve got very little retail demand out the curve as you have deficit concerns and higher Treasury rates,” both of which are driving the Treasury market steeper, Congdon said.

And with light retail demand, there has been little institutional demand, which has been declining for years, he said.

Market participants have plenty of money to put to work, and the new-issue market is the place to do it, especially on weeks when there is higher supply, Congdon said.

“Hopefully, we’re getting into the range of some crossover support in the long end,” he noted.

When long-end ratios get to the mid- to high-90s, even at a lower corporate tax rate, “you’re starting to add value over taxable corporates on an after-tax basis,” Congdon said.

However, much of the pain in the market has subsided, and crossover support is close, he said.

Helping this is that most of the macro volatility and the aggregate uncertainty around policy in general is “behind us,” Congdon said.

There is more clarity on tax legislation, and most of the tariff volatility has passed, he said.

Even if the Trump administration enacts large tariffs against other countries, the market has seen this “playbook” before, according to Congdon.

“It’s a little bit of a shock and awe negotiating tactic you’ve already extended out to Aug. 1,” he said.

The United States will end up with a higher average tariff rate than it has had in over a century, but the general consensus is it will not disrupt things terribly, Congdon said.

And as macro volatility subsides, the muni market should enter the summer doldrums, characterized by a period of support and a slight slowdown in issuance from the first half, though it will not be extensive enough to create a massive tailwind, he said.

In the primary market Tuesday, Siebert Williams Shank priced for the District of Columbia Water and Sewer Authority (Aa2/AA+/AA/) $216.335 million of public utility subordinate lien revenue and revenue refunding bonds. The first tranche, $55.49 million of Series A bonds, saw 5s of 10/2028 at 2.52%, 5s of 2030 at 2.71%, 5s of 2035 at 3.51%, 5s of 2040 at 4.27% and 5s of 2044 at 4.66%, callable 10/1/2035.

The second tranche, $160.845 million of green Series B bonds, saw 5s of 10/2026 at 2.46%, 5s of 2030 at 2.71%, 5s of 2035 at 3.51%, 5s of 2039 at 4.15%, 5s of 2045 at 4.70%, 5.25s of 2050 at 4.83% and 5.25s of 2054 at 4.89%, callable 10/1/2035.

FHN Financial priced for the Forney Independent School District, Texas, (/AAA//) $207.515 million of PSF-insured unlimited tax school building and refunding bonds, with 5s of 8/2026 at 2.58%, 5s of 2030 at 2.85%, 5s of 2035 at 3.67%, 5s of 2040 at 4.37%, 5.25s of 2045 at 4.79%, 5s of 2050 at par and 5.25s of 2055 at 5.03%, callable 8/15/2035.

BofA Securities priced for the Cobb-Marietta Coliseum and Exhibit Hall Authority (Aa2/AA-//) $188.92 million of Cobb Galleria Centre project revenue bonds, with 5s of 10/2027 at 2.62%, 5s of 2030 at 2.86%, 5s of 2035 at 3.70%, 5s of 2040 at 4.42%, 5.25s of 2045 at 4.92%, 5.5s of 2050 at 5.09% and 5.5s of 2053 at 5.12%, callable 4/1/2035.

BofA Securities priced for the New Hampshire Health and Education Facilities Authority (Aa1/AAA//) $155 million of Dartmouth College issue revenue bonds, Series 2025A, with 5s of 6/2032 at 3.03% and 5s of 2035 at 3.52%, noncall.

Wells Fargo priced for the Nash Health Care Systems (/BBB+/A-/) $154.06 million of health care facilities revenue bonds, with 5s of 2/2032 at 3.55%, 5.5s of 2043 at 5.00%, 5s of 2045 at 5.20%, 5.75s of 2050 at 5.30% and 5.25s of 2055 at 5.48%, callable 2/1/2035.

BofA Securities priced for the Maine Governmental Facilities Authority (Aa2/AA-//) $150 million of lease rental revenue bonds, Series 2025A, with 5s of 10/2026 at 2.59%, 5s of 2030 at 2.80%, 5s of 2035 at 3.69%, 5s of 2040 at 4.42% and 5.25s of 2045 at 4.88%, callable 10/01/2035.

Baird priced for the Sierra Vista Industrial Development Authority $108.815 million of nonrated education facility revenue bonds (Wake Preparatory Academy), with 5.25s of 6/2035 at 5.29%, 6.25s of 2045 at 6.33%, 6.25s of 2050 at 6.56%, 6.5s of 2055 at 6.63% and 6.5s of 2060 at 6.68%.

AAA scales
MMD’s scale was little changed: The one-year was at 2.45% (unch) and 2.45% (unch) in two years. The five-year was at 2.59% (unch), the 10-year at 3.34% (unch) and the 30-year at 4.71% (-2) at 3 p.m.

The ICE AAA yield curve was bumped up to two basis points on the front end: 2.44% (-2) in 2026 and 2.40% (-1) in 2027. The five-year was at 2.60% (-1), the 10-year was at 3.28% (unch) and the 30-year was at 4.65% (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 2.45% (unch) in 2025 and 2.46% (unch) in 2026. The five-year was at 2.59% (unch), the 10-year was at 3.34% (-1) and the 30-year yield was at 4.71% (-2) at 4 p.m.

Bloomberg BVAL was bumped one to two basis points: 2.44% (-1) in 2025 and 2.46% (-1) in 2026. The five-year at 2.58% (-1), the 10-year at 3.31% (-1) and the 30-year at 4.70% (-2) at 4 p.m.

Treasuries saw gains.

The two-year UST was yielding 3.828% (-3), the three-year was at 3.775% (-4), the five-year at 3.877% (-4), the 10-year at 4.337% (-4), the 20-year at 4.893% (-4) and the 30-year at 4.905% (-4) 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 Illinois Housing Development Authority (Aaa///) is set to price Thursday $350 million of social revenue 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 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 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 East Allen Multi School Building Corp. (/AA+//) is set to price Wednesday $120 million of ad valorem property tax first mortgage bonds. Stifel.

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.