Munis quiet as $1.8B Illinois GOs sell
6 min read
Munis were steady Tuesday while focus turned to the primary market as $1.775 billion of Illinois general obligation bonds sold in the competitive market in six series. Short-term U.S. Treasury yields fell and equities ticked up.
The two-year muni-UST ratio Tuesday was at 60%, the five-year at 63%, the 10-year at 76% 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 59%, the five-year at 63%, the 10-year at 74% and the 30-year at 94% at a 4 p.m. read.
This week will be slow ahead of the Labor Day holiday, with a more manageable calendar ($6.639 billion), with one-quarter of the supply coming from $1.775 billion of Illinois general obligation bonds in the competitive market.
The six-part Illinois deal, along with the $834 billion of gas revenue bonds from the Kentucky Public Energy Authority, on the day-to-day calendar, represent a large chunk of the new issue market that many people have restrictions about buying, including in the separately managed account space, said Whitney Fitts, director of municipal portfolio management at Appleton Partners.
While issuance is up year-over-year, weeks like this can be difficult to find the right deals, she said.
“Dealer inventory is pretty stale right now, so there’s not a ton to pick from in the secondary, which is challenging too,” so the new-issue deals that people can buy, like those from California issuers, come across “really well,” Fitts said, noting some California deals are trading “40 through” basis points to the AAA scale.
Munis face “multiple curve steepening vectors, headlined by rising new issue supply amid a sharp drop in reinvestment after August, more credit and budget pressures via federal retrenchment, hurricanes, immigration, tariffs, inflation, etc., and an upcoming surge of UST supply to pay for the federal deficit,” said Matt Fabian, a partner at Municipal Market Analytics.
However, with Federal Reserve Chair Jerome Powell signifying a possible September rate cut, this position, at least the front, is expected to attract more buyers and rally, he said.
The long end, though, still has to contend with upcoming inflation data, set to come before the next Federal Open Market Committee meeting, but even here, munis have found a way to at least temporarily bolster demand, Fabian said.
“These are not just about SMA demand strength, but also: 1) energized marketing efforts portraying value with tax-exempt rates near traditionally attractive level; 2) a wave of [tender offer bond] creations (likely buyers financing new positions) to take advantage of the steep curve, cheap long-end, and still high ratings; 3) and an exceptional [exchange-traded fund] inflow that will help keep high yield/lower rated spreads tighter,” he said, noting these factors could “well rally longer bonds through current levels.”
However, this year, lower yields are “more speculative than typical, and resilient clearing levels are ultimately leashed to retail calculations of safe and attractive income,” Fabian said.
So while prices could start to rally, “such could be prone to correction as: 1) fund flows can change, quickly, 2) crossover buyers are still not present in scale amid low tax rates and M/T ratios; and, 3) more buying with leverage/TOBs heightens potential volatility and/or liquidity challenges — especially amid rising headline risks,” he said.
This is not a major concern as of last week, but market participants should carefully manage performance and liquidity expectations, Fabian said.
In the primary market Tuesday, Barclays priced for the
The second tranche, $59.43 million of taxable Series 2025E-2 bonds, saw 4.45s of 9/2025 price at par, noncall.
The third tranche, $226.355 million of Series 2025H refunding bonds, saw 5s of 8/2026 at 1.93%, 5s of 2030 at 2.11% and 5s of 2035 at 3.05%, noncall.
Morgan Stanley priced for the Arizona Board of Regents (Aa2/AA//) $302.18 million of tax-exempt Arizona State University system revenue bonds, Series 2025A, with 5s of 7/2026 at 2.25%, 5s of 2030 at 2.47%, 5s of 2035 at 3.37%, 5s of 2040 at 4.08%, 5s of 2045 at 4.63% and 5s of 2046 at 4.69%, callable 7/1/2035.
BofA Securities priced for the Washington State Housing Finance Commission $262.231 million of municipal certificates, Series 2025-1. The first tranche, $213.718 million of Class A-1 bonds (/AA-//), saw 4.078s of 11/2041 price at 4.97%, noncall.
The second tranche, $41.301 million of Class A-2 bonds (/BBB+//) saw 4.078s of 11/2041 price at 5.34%, noncall.
The third tranche, $7.212 million of nonrated subordinate Class B bonds, saw 4.078s of 1/2042 price at 7.375%, noncall.
J.P. Morgan priced for the Anaheim Housing and Public Improvements Authority (/AA-/AA-/AA/) $210.6 million of electric utility distribution system revenue bonds. The first tranche, $97.97 million of improvement bonds, Series 2025-A, saw 5s of 10/2026 at 2.02%, 5s of 2030 at 2.20%, 5s of 2035 at 3.36%, 5s of 2040 at 4.26%, 5s of 2045 at 4.84%, 5.25s of 2050 at 4.93% and 5.5s of 2055 at 4.88%, callable 10/2030.
The second tranche, $112.63 million of refunding bonds, Series 2025-B, saw 5s of 10/2026 at 2.02%, 5s of 2030 at 2.20%, 5s of 2035 at 3.36%, 5s of 2040 at 4.26%, 5s of 2045 at 4.84% and 5.25s of 2047 at 4.87%, callable 10/2030.
In the competitive markets, Illinois (A3/A-/A-/) sold $1.775 billion of GOs.
The state sold $240 million of taxable GOs, Series of September 2025A, Wells Fargo, with all bonds priced at par: 4.1s of 9/2026, 4.22s of 2030 and 4.89s of 2035, noncall.
The state also sold $235 million of GOs, Series of September 2025B, to Wells Fargo, with 5s of 9/2026 at 2.60% and 5s of 2030 at 2.85%, noncall.
Illinois sold $235 million of GOs, Series of September 2025C, to Wells Fargo, with 5.25s of 9/2031 at 3.07% and 5s of 2035 at 3.82%, callable 9/2034.
Additionally, the state sold $355 million of GOs, Series of September 2025D, to BofA Securities, with 5s of 9/2036 at 4.05% and 5s of 2040 at 4.60%, callable 9/2034.
The state also sold $355 million of GOs, Series of September 2025E, to J.P. Morgan, with 5s of 9/2041 at 4.80% and 5s of 2045 at 5.10%, callable 9/2034.
Illinois sold $355 million of GOs, Series of September 2025F, to J.P. Morgan Securities, with 5.25s of 9/2046 at 5.10% and 5.25s of 2050 at 5.20%, callable 9/2034.
The Berkeley County School District sold $114.005 million of GOs, Series 2025A, to BofA Securities, with 5s of 6/2026 at 2.45%, noncall.
The Santa Clara Valley Water District (Aa1//AA+/) sold $110.275 million of water system refunding revenue bonds, Series 2025A, to J.P. Morgan, with 5s of 6/2028 at 1.90%, 5s of 2030 at 2.00%, 5s of 2035 at 2.89%, 5s of 2040 at 3.78%, 5s of 2045 at 4.30% and 5s of 2046 at 4.35%, callable 6/2035.
AAA scales
MMD’s scale was unchanged: The one-year was at 2.17% and 2.19% in two years. The five-year was at 2.37%, the 10-year at 3.23% and the 30-year at 4.61% at 3 p.m.
The ICE AAA yield curve was unchanged: 2.24% in 2026 and 2.20% in 2027. The five-year was at 2.39%, the 10-year was at 3.16% and the 30-year was at 4.59% at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.18% in 2025 and 2.20% in 2026. The five-year was at 2.36%, the 10-year was at 3.23% and the 30-year yield was at 4.60% at 4 p.m.
Bloomberg BVAL was unchanged: 2.18% in 2025 and 2.20% in 2026. The five-year at 2.36%, the 10-year at 3.20% and the 30-year at 4.60% at 4 p.m.
Treasuries saw gains on the front of the curve.
The two-year UST was yielding 3.68% (-5), the three-year was at 3.623% (-5), the five-year at 3.741% (-5), the 10-year at 4.257% (-2), the 20-year at 4.869% (+1) and the 30-year at 4.908% (+2) near the close.
Primary to come
The Rhode Island Health and Educational Building Corp. (/BB-//) is set to price Wednesday $141.36 million of hospital financing revenue bonds (Chartercare Health of Rhode Island Obligated Group), consisting of $127.86 million of Series 2025A bonds and $13.5 million of taxable Series 2025B bonds. Barclays.
The Michigan Finance Authority (/A-/A-/) is set to price Wednesday $131.225 million of local government loan program revenue refunding bonds (Public Lighting Authority Refunding Local Project), Series 2025A. Siebert Williams Shank.
Competitive:
The South Carolina Association of Governmental Organizations is set to sell $306.945 million of certificates of participation, Series 2025B (South Carolina School District Credit Enhancement Program), at 11 a.m. Thursday.
North Hempstead is set to sell $142.701 million of bond anticipation notes at 10:30 a.m. Thursday.
Frank Gargano contributed to this report.
