Munis slightly firmer in spots, UST yields fall in sympathy
5 min read
Municipals were steady to slightly firmer Monday as U.S. Treasury yields fell in sympathy and equities ended up.
The two-year muni-UST ratio Friday was at 57%, the five-year at 60%, the 10-year at 71% and the 30-year at 90%, according to Municipal Market Data’s 3 p.m. ET read. ICE Data Services had the two-year at 56%, the five-year at 59%, the 10-year at 71% and the 30-year at 92% at a 4 p.m. read.
Despite “choppy” UST action, the muni market maintains its firm tone it has seen since the jobs report on Sept. 5, with trade volume near year-to-date highs last week, said Birch Creek strategists.
Last week, the MMD scale was bumped 11 basis points up front and 19 to 20 basis points out long, outperforming USTs by around 15 to 20 basis points across the curve, they said.
“This was a much-needed rally as the long end struggled throughout the year, but now has been pushed back into positive territory,” said Jason Wong, vice president of municipals at AmeriVet Securities.
MMD yields have fallen 38 basis points in the long end, with the belly of the curve having been bumped around 36 basis points and the front end bumped 20 basis points.
Munis are seeing gains of 2.38% month-to-date, bringing year-to-date gains of 2.70%.
The hotter-than-expected consumer price index and jobless claims report from Thursday all but “solidified a 25-basis-point cut later this week and set the stage for potentially two more cuts later this year, which could continue to fuel a rally for the remainder of the year,” Wong said.
Supply was light last week as the $10-plus billion new-issue calendar was “mostly devoid of clean high-grade new issues and instead littered with large deals in spreadier and lower-rated sectors like airports, healthcare, and housing,” Birch Creek strategists said.
Secondary volumes surged as funds were flush with cash and there were few good choices in the new issue market, they said.
Bids wanted rose 9% entirely driven by “ultra short paper and short-call bonds with little duration, while longer maturity bonds saw volumes decline 13% to 18%, Birch Creek strategists said.
On the other hand, customer purchases rose 16%, with the largest uptick in 20-plus-year paper up 31%, Birch Creek strategists said.
“One dealer commented that this rally felt different from others this year and that the seemingly all-clear signal from the Fed to begin cutting rates has emboldened accounts that had been hesitant to take on risk, they said.
Instead of waiting on the sidelines for any rate weakness, the dealer felt customers were going to step in and buy the dip, Birch Creek strategists.
The structures hit the hardest in the selloff were the “biggest beneficiaries of this new attitude as inquiries jumped for short-call paper and long-duration high-grade 4% coupon bonds that are still comfortably at a discount,” they said.
Even with the outperformance, most trades printed at least 10 basis points better than the MMD curve implied, while new issues saw a surge in demand as well, Birch Creek strategists said.
While a Treasury selloff could “sap the momentum, participants are betting that the about-face in performance will lead to stronger inflows, which should boost demand above what’s expected to be a relatively tame supply picture over the coming weeks,” they said.
In the primary market Monday, Raymond James priced for the Douglas County School District (Aa1/AA+//) $267.52 million of Georgia State Aid Intercept Program-insured general obligation bonds, with 5s of 4/2028 at 2.14%, 5s of 2030 at 2.30%, 5s of 2035 at 3.00%, 5s of 2040 at 3.68% and 5s of 2042 at 3.90%, callable 4/203
Raymond James priced for the Richmond County Board of Education (Aa1/AA+//) $194.705 million of Georgia State Aid Intercept Program-insured GO sales tax bonds, with 5s of 10/2028 at 2.16%, 5s of 2030 at 2.34% and 5s of 2032 at 2.67%, noncall.
AAA scales
MMD’s scale was bumped two basis points five years and out: The one-year was at 2.12% (unch) and 2.00% (unch) in two years. The five-year was at 2.15% (-2), the 10-year at 2.88% (-2) and the 30-year at 4.21% (-2) at 3 p.m.
The ICE AAA yield curve was bumped up to two basis points: 2.05% (unch) in 2026 and 2.00% (unch) in 2027. The five-year was at 2.12% (-1), the 10-year was at 2.86% (-1) and the 30-year was at 4.24% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.11% in 2025 and 1.99% in 2026. The five-year was at 2.16%, the 10-year was at 2.90% and the 30-year yield was at 4.23% at 3 p.m.
Bloomberg BVAL was bumped up to two basis points: 2.04% (unch) in 2025 and 2.00% (unch) in 2026. The five-year at 2.11% (-1), the 10-year at 2.84% (-1) and the 30-year at 4.19% (-2) at 4 p.m.
Treasuries saw small gains.
The two-year UST was yielding 3.536% (-2), the three-year was at 3.498% (-3), the five-year at 3.603% (-3), the 10-year at 4.037% (-3), the 20-year at 4.621% (-3) and the 30-year at 4.66% (-2) near the close.
Primary to come
The
Houston, Texas, (Aa3//AA/) is set to price Tuesday $289.21 million of public improvement refunding bonds. HilltopSecurities.
The Louisiana Public Facilities Authority (A1//A/) is set to price Tuesday $211.24 million of Assured Guaranty-insured lease revenue bonds (South Quad L3C — Louisiana State University South Quad (Phase IV) Project). RBC Capital Markets.
The New York City Housing Development Corp. (Aa2///) is set to price Tuesday $198.76 million of taxable sustainable development housing impact bonds, Series 2025D. Jefferies.
The Philadelphia Authority for Industrial Development (A1/A+/A+/) is set to price Tuesday $170.27 million of city service agreement revenue bonds, consisting of $128.79 million of Rebuild Project bonds, Series 2025A, and $41.48 million of Cultural and Commercial Corridors Program refunding bonds, Series 2025B. Ramirez.
Sarasota County, Florida, (/AA+/AA+/) is set to price Tuesday $146.71 million of utility system revenue bonds. BofA Securities.
Leander, Texas, (Aa1/AA//) is set to price Thursday $132.105 million of combination tax and revenue certificates of obligation. FHN Financial Capital Markets.
Competitive
The Greenville County School District, Georgia, (MIG1/A-1+//) is set to sell $185.5 million of GOs (South Carolina School District Credit Enhancement Program), Series 2025C, at 11:30 a.m. Eastern Thursday.
The Clover School District No. 2, South Carolina, (MIG1///) is set to sell $156 million of GO bond anticipation notes at 11 a.m. Wednesday.
Tulsa, Oklahoma, (Aa1/AA//) is set to sell $107.705 million of GOs, Series 2025A, at noon Wednesday.
