Munis steady to open November after best October performance in 30 years
6 min read
Munis were little changed to start the month as U.S. Treasuries saw losses and equities were mixed.
The two-year muni-UST ratio Monday was at 68%, the five-year at 64%, the 10-year at 67% and the 30-year at 88%, according to Municipal Market Data’s 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 65%, the 10-year at 68% and the 30-year at 88% at a 4 p.m. read.
The muni market outperformed USTs last week, falling only “modestly” after large rate moves took hold, said Birch Creek strategists.
MMD’s scale saw yields cut two to three basis points out to 10 years and five basis points in 30 years, while dealers noted a “very constructive tone” in the market, they said.
Muni mutual funds saw solid inflows of $719.9 billion, driven by $2.5 billion of inflows into exchange-traded funds, while open-end funds appeared to see large outflows of $1.8 billion, according to J.P. Morgan strategists led by Peter DeGroot.
“However, this sharp divergence is largely attributable to one fund complex converting some of its open-end funds (~$2.3 billion) into ETFs,” they said.
If adjusted, inflows into ETFs should have been closer to $200 million, and open-end fund flows would have been positive at around $500 million, according to J.P. Morgan strategists.
Furthermore, the market has gotten past “what was supposed to be a seasonally weak stretch of performance for the muni market where supply outpaces redemption cash, but instead we finished the month with the best October return in 30 years,” Birch Creek strategists said.
“Normalized supply, a supportive rate environment, and favorable technicals propelled the municipal market to the best October performance [in decades],” said Robert J. Lind.
Investment-grade munis saw gains of 1.24% in October, while high-yield munis saw positive returns of 1.00%.
“Both municipal indices were positive for the third straight month as the asset class is buoyed by a sturdy fundamental backdrop and steady investor demand,” Lind said.
Issuance last month was $55.348 billion, down 16.8% from $66.513 billion in 2024. However, it remained above October’s 10-year average of $49.033 billion.
Heading into year end, market participants are “especially optimistic” as this is a time where “typically strong months [are] defined by heavy reinvestment cash to support demand while deal flow slows down over multiple holiday and vacation periods,” Birch Creek strategists said.
Primary market concessions have fallen over the past several weeks and, in some cases, new issues have priced “on top of or even through secondary market spreads, which is driving more participants and better inquiry into the secondary market,” they said.
“While a meaningful rise in interest rates would surely knock the wind out of the muni market’s optimism, several dealers expect any backup would be well bid and would soften the blow,” Birch Creek strategists said.
In the primary market Monday, J.P. Morgan priced for the Southeast Energy Authority (Aa3///) $2.699 billion of energy supply revenue bonds, Series 2025E, with 5s of 10/2027 at 3.23% and 5s of 2030 at 3.38%, callable 7/1/2030.
AAA scales
MMD’s scale was unchanged: 2.56% in 2026 and 2.46% in 2027. The five-year was 2.38%, the 10-year was 2.73% and the 30-year was 4.15% at 3 p.m.
The ICE AAA yield curve was cut one to two basis points: 2.56% (+1) in 2026 and 2.47% (+1) in 2027. The five-year was at 2.42% (+2), the 10-year was at 2.78% (+2) and the 30-year was at 4.12% (+1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.55% in 2025 and 2.46% in 2026. The five-year was at 2.38%, the 10-year was at 2.73% and the 30-year yield was at 4.12% at 3 p.m.
Bloomberg BVAL was little changed: 2.52% (unch) in 2025 and 2.47% (unch) in 2026. The five-year at 2.37% (unch), the 10-year at 2.72% (unch) and the 30-year at 4.07% (+1) at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.601% (+3), the three-year was at 3.608% (+3), the five-year at 3.717% (+3), the 10-year at 4.108% (+3), the 20-year at 4.664% (+4) and the 30-year at 4.691% (+4) near the close.
Primary to come
The Los Angeles Department of Water and Power (Aa2//AA-/AA/) is set to price Thursday $977.65 million of water system revenue refunding bonds, Series 2025C. RBC Capital Markets.
Ohio (Aaa/AAA/AAA/) is set to price Wednesday $510.635 million of GOs, consisting of $294.195 million of Series C, $171.51 million of Series D and $44.93 million of Series A. Morgan Stanley.
Austin (Aa3/AA-/AA-/) is set to price Tuesday $418.81 million of electric utility system revenue refunding bonds. Morgan Stanley.
The city (A1/A+//AA-/) is also set to price Thursday $224.115 million of AMT airport system revenue refunding bonds, Siebert Williams Shank.
The Lee County School Board (Aa3//AA-/) is set to price Tuesday $392.63 million of certificates of participation, consisting of $330.24 million of Series A and $62.39 million of Series B. BofA Securities.
The Illinois Finance Authority (A1/A+/AA-/) is set to price Tuesday $389.995 million of Rush University System for health revenue bonds. BofA Securities.
North Carolina (Aaa/AAA/AAA/) is set to price Wednesday $327.95 million of GO refunding bonds, consisting of $147.885 million of Series 2025C bonds and $180.065 million of Series 2026A forward delivery bonds. BofA Securities.
Chicago (/A+/A+/A+/) is set to price Tuesday $327.51 million of Chicago O’Hare International Airport general airport senior lien revenue bonds, consisting of $207.19 million of Series 2025A AMT bonds and $129.32 million of Series 2025B non-AMT bonds. Cabrera Capital Markets.
The Greater Orlando Aviation Authority (/BB+//) is set to price Tuesday $257.7 million of special purpose airport facilities revenue bonds (United Airlines Project), Series 2025. J.P. Morgan.
The Waste Pro USA Project is set to price $200 million of nonrated solid waste disposal revenue bonds through the Florida Development Finance Corp., the Mississippi Business Finance Corp. and the Louisiana Public Facilities Authority. Barclays.
Maryland Community Development Administration (Aa1//AA+/) is set to price Tuesday $180 million of taxable social residential revenue bonds, 2025 Series H. RBC Capital Markets.
The Fort Collins-Loveland Water District, Colorado, (/AA+//) is set to price Tuesday $161.32 million of water enterprise revenue bonds. Stifel Nicolaus.
The Huntsville Health Care Authority (A1///) is set to price Tuesday $160 million of Series 2025B bonds. BofA Securities.
The Colton Joint Unified School District, California, (Aa3/AA//) is set to price Tuesday $151.07 million of BAM-insured election of 2024 GO bonds, Series A, consisting of $106.91 million of capital indexed bonds and $44.16 million of capital appreciation bonds. Stifel Nicolaus.
Irvine, California, (/AA//) is set to price Wednesday $131.37 million of Community Facilities District No. 2013-3 (Great Park) Improvement Area No. 11 special tax bonds, 2025, insured by Assured Guaranty, consisting of $127.825 million of capital indexed bonds and $3.55 million of capital appreciation bonds. Stifel Nicolaus.
The New York State Housing Finance Agency (Aa2///) is set to price Thursday $115.51 million of sustainability affordable housing revenue bonds, 2025 Series E. J.P. Morgan.
The Missouri Development Finance Board is set to price Wednesday $100.315 million of nonrated tax-exempt tax increment and special district revenue bonds (Lakeport Village Project), Series 2025A. Stifel Nicolaus.
The American Municipal Power (A1/A//) is set to price Tuesday $100.2 million of Greenup Hydroelectric Project revenue refunding bonds, Series 2025A. Wells Fargo.
Competitive
Washington (Aaa/AA+/AA+/) is set to sell $540.065 million of various purpose GO refunding bonds, Series R-2026A, at 10:15 a.m. Eastern on Wednesday; and $226.815 million of motor vehicle fuel tax and vehicle-related fees GO refunding bonds, Series R-2026B, at 10:45 a.m. Wednesday.
The Illinois State Toll Highway Authority (Aa3/AA-/AA-/) is set to sell $500 million of toll highway senior revenue bonds, Series 2025A, at 10:15 a.m. Tuesday.
King County, Washington, (Aa1/AA+//) is set to sell $267.52 million of sewer revenue and refunding bonds, Series 2025A, at 10:45 a.m. Thursday.
The Charleston County School District, South Carolina, (/AA+//) is set to sell $135.57 million of GOs, Series 2025B (South Carolina School District Enhancement Program), at 11 a.m. Tuesday.
Hennepin County, Minnesota, (//AAA/) is set to sell $135.57 million of GOs, Series 2025A, at 10:45 Tuesday.
