Munis quiet as outperformance continues
5 min read
Municipals were steady Monday as U.S. Treasury yields rose slightly and equities ended up.
The two-year muni-UST ratio Monday was at 56%, the five-year at 58%, the 10-year at 69% and the 30-year at 88%, according to Municipal Market Data’s 3 p.m. ET read. ICE Data Services had the two-year at 57%, the five-year at 58%, the 10-year at 69% and the 30-year at 89% at a 4 p.m. read.
The muni market “kicked off [last] week on solid footing” amid a “light primary calendar, mid-month reinvestment cash hitting accounts and treasuries continuing to rally,” Birch Creek strategists said.
“On a month-to-date basis, AAA munis have outperformed Treasuries across the entire curve. … This outperformance can be attributable to an improvement in market technicals,” said Daryl Clements, a portfolio manager at AllianceBernstein.
This outperformance has “driven short-maturity bonds to expensive valuations relative to short Treasuries,” he said.
Meanwhile, the long end “continues to remain quite attractive and provides significant opportunity if yields continue to fall,” Clements said.
Supply picked up this week after taking a “breather” last week, he noted.
This week’s calendar is estimated at $14.78 billion, led by $2.3 billion of general obligation bonds from California, consisting of $700 million of various purpose GOs and $1.6 billion of various purpose refunding GOs.
Muni mutual funds saw inflows of $1.045 billion last week. Investment-grade mutual funds saw inflows of $620 million, while high-yield mutual funds saw inflows of $425 million, according to LSEG Lipper.
Bids wanteds were up 15% but “were again led by tenors inside one year] and short-call paper as accounts looked to extend duration,” Birch Creek strategists said.
Before last week’s
The outperformance caused the relative value argument to wane, and the muni market gave back some of its gains in the back half of the week, with the benchmark MMD curve lower by 1-2bps across all tenors except the very front end, they said.
With muni-UST ratios closing Friday at 56% to 58% up front, 70% in the 10-year and 89% in the 30 year, “we do not see many catalysts that would lead to further outperformance and suspect munis will more closely mirror Treasury fluctuations over the coming weeks,” Birch Creek strategists said.
AAA scales
MMD’s scale was unchanged: The one-year was at 2.12% and 2.02% in two years. The five-year was at 2.15%, the 10-year at 2.88% and the 30-year at 4.22% at 3 p.m.
The ICE AAA yield curve was little changed: 2.14% (unch) in 2026 and 2.05% (-1) in 2027. The five-year was at 2.14% (unch), the 10-year was at 2.85% (unch) and the 30-year was at 4.23% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.11% in 2025 and 2.01% in 2026. The five-year was at 2.16%, the 10-year was at 2.88% and the 30-year yield was at 4.22% at 3 p.m.
Bloomberg BVAL was unchanged: 2.04% in 2025 and 2.01% in 2026. The five-year at 2.10%, the 10-year at 2.83% and the 30-year at 4.20% at 4 p.m.
Treasuries saw small losses.
The two-year UST was yielding 3.606% (+3), the three-year was at 3.585% (+3), the five-year at 3.701% (+2), the 10-year at 4.148% (+2), the 20-year at 4.732% (+2) and the 30-year at 4.765% (+2) at the close.
Primary to come
California (Aa2/AA-/AA//) is set to price Thursday $2.3 billion of GOs, consisting of $700 million of various purpose GOs and $1.6 billion of various purpose refunding GOs. Wells Fargo.
The Texas Water Development Board (/AAA/AAA/) is set to price Wednesday $1.871 billion of state water implementation revenue fund for Texas revenue bonds (Master Trust). BofA Securities.
Connecticut (Aa2/AA-/AA/AA+) is set to price Wednesday $1.815 billion of GOs, consisting of $300 million of taxable Series B bonds, $800 million of Series C bonds and $715 million of Series 2025 refunding bonds. Morgan Stanley.
Texas (/AAA/AAA/) is set to price Thursday $761.98 million of GO water financial assistance bonds (State Water Plan), with $444.725 million of Series 2025E bonds and $317.245 million of taxable Series 2025F bonds. BofA Securities.
The San Diego Public Facilities Financing Authority (/AA-/AA/) is set to price Tuesday $625.87 million of lease revenue and lease revenue refunding bonds (capital improvement and refunding projects), Series 2025A. Jefferies.
The Michigan State Housing Development Authority (Aa2/AA+//) is set to price Thursday $547.5 million of single-family mortgage revenue bonds, consisting of $412.105 million of non-AMT bonds, Series 2025C, and $135.395 million of taxables, Series 2025D. RBC Capital Markets.
The Washington Health Care Facilities Authority (/A/A/) is set to price Tuesday $400 million of revenue bonds (Providence St. Joseph Health), consisting of $200 million of fixed-rate Series 202B-1 bonds and $200 million of term-rate Series 202B-2 bonds. J.P. Morgan.
San Antonio, Texas, (Aa1/AA+/AA/) is set to price Tuesday $297.87 million of water system junior lien revenue refunding bonds, Series 2025C. BofA Securities.
The Missouri Health and Educational Facilities Authority (A2//A/) is set to price Tuesday $253.545 million of health facilities revenue refunding bonds (CoxHealth), consisting of $135.88 million of Series 2025A and $117.665 million of Series 2025B. RBC Capital Markets.
The Public Hospital District No. 4, Washington, is set to price Wednesday $174.13 million of nonrated hospital revenue refunding bonds (Snoqualmie Valley Health), Series 2025A. Piper Sandler.
Quincy, Massachusetts, is set to price Tuesday $170.222 million of GO bond anticipation notes. Ramirez.
The State Center Community College District, California, (Aa1/AA+//) is set to price Tuesday $137.28 million of GOs, consisting of $105 million of Election of 2016 GOs, Series 2025D, and $32.28 million 2025 GO refunding bonds. RBC Capital Markets.
The New York City Housing Development Corp. (Aa2/AA+//) is set to price Thursday $121.46 million of non-AMT sustainable development multi-family housing revenue bonds, Series 2025F. J.P. Morgan.
The Northshore School District No. 417, Washington, (Aaa///) is set to price Tuesday $117.56 million of unlimited tax refunding GOs. Piper Sandler.
The Valparaiso 21st Century School Building Corp. (/AA+//) is set to price Tuesday $105.415 million of Indiana State Aid Intercept Program-insured unlimited ad valorem property tax first mortgage refunding bonds. Stifel.
Competitive:
Minnesota (Aaa/AAA/AAA/) is set to sell $294.915 million of state trunk highway GOs, Series 2025B, at 10:15 a.m. Eastern Tuesday; $275.215 million of state various purpose GOs, Series 2025A, Bidding Group 1, at 10:45 a.m. Tuesday; $275.2 million of state various purpose GOs, Series 2025A, Bidding Group 2, at 11:15 a.m. Tuesday; $236.195 million of state various purpose refunding GOs, Series 2025D, at 11:45 a.m. Tuesday; $158.69 million of state trunk highway refunding GOs, Series 2025E, at 12:15 p.m. Tuesday; and $25.6 million of taxable various purpose bond GOs, Series 2025C, at 12:45 p.m. Tuesday.
The North Texas Municipal Water District (Aa2/AAA//) is set to sell $286.84 million of regional wastewater system revenue refunding and improvement bonds at 11:30 a.m. Thursday.
The North Texas Municipal Water District (Aa1/AAA//) is set to sell $152.18 million of Upper East Fork wastewater interceptor system contract revenue refunding and improvement bonds at noon on Thursday.
The Pinellas County School District is set to sell $150 million of tax anticipation notes at 11 a.m. Thursday.
The Park Hill School District, Missouri, /AA-//) is set to sell $128 million of GOs (Missouri Direct Deposit Program) at 11 on Tuesday.
The Oldham County School District, Kentucky, (Aa3///) is set to sell $106.415 million of GOs (Kentucky School District Enhancement Program), Series 2025B, at 10:30 a.m. on Tuesday.
