Munis little changed, USTs see losses

Munis were little changed Thursday as U.S. Treasuries saw losses and equities ended mixed.

The two-year muni-UST ratio Thursday was at 69%, the five-year at 66%, 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 70%, the five-year at 66%, the 10-year at 68% and the 30-year at 88% at a 4 p.m. read.

Muni investors will receive $46 billion of principal and interest payments this month, just over $30 billion of which was payable on Dec. 1 — $19.7 billion of principal and $10.7 billion of interest — said Pat Luby, head of municipal strategy at CreditSights.

Total redemptions this year are at $364 billion, up slightly from 2024’s $362 billion. Next year, planned redemptions already total $263 billion. The amount of bonds maturing in 2026 will increase 4% year-over-year, he said.

Supply has been elevated this year. Issuance through the first 11 months of the year totaled $535.15 billion, up 11.5% from $479.829 billion over the same period in 2024, topping 2024’s record $507.585 billion.

And issuance shows no signs of stopping in early December.

The first week of December saw robust issuance of $16 billion, and sizable deals are already on tap for next week.

Next week will see $2 billion of general revenue bonds from the Regents of the University of California, $1.003 billion of Chicago O’Hare International Airport general airport senior line refunding bonds and $997.76 million of multi-family housing revenue bonds from the New York City Housing Development Corp.

“This year’s elevated issuance reflects a rebound from the muted supply environment of 2022–23, when inflation and interest-rate volatility constrained borrowing,” said Sam Weitzman of Western Asset. “It also reflects policy-related uncertainty, which accelerated issuance among certain sectors looking to secure market access ahead of potential changes.”

Robust issuance this year has contributed to muni underperformance relative to other asset classes, but it also has “improved after-tax relative value for investors in higher tax brackets,” he said.

Continued interest rate volatility and uncertainty surrounding future policy changes could keep issuance elevated through yearend and into next year, Weitzman said.

Market demand, though, will “better absorb this supply as cash deposit yields drift lower alongside expected additional Federal Reserve rate cuts,” he said.

“Given the attractive after-tax relative value versus other fixed-income sectors, we expect munis to capture a meaningful share of this potential demand,” Weitzman said.

This year’s performance was impacted by the high supply, which was elevated in part by fears of the elimination of the tax exemption and higher inflation costs, said Cooper Howard, a fixed-income strategist at Charles Schwab.

Next year’s performance will be influenced by demand, he said, noting that another year of robust supply will necessitate strong demand.

New-issue calendar
In the primary market Thursday, BofA Securities priced for the Utility Debt Securitization Authority, New York, (Aaa/AAA/AAA/) $1.093 billion of restructuring bonds. The first tranche, $116.305 million of Series 2025TE-1 green bonds, saw 3.75s of 12/2042 at 3.80%, 5s of 2045 at 3.97% and 5s of 2047 at 4.14%, callable 12/15/2035.

The second tranche, $976.55 million of Series 2025 TE-2 bonds, saw 5s of 6/2028 at 2.52%, 5s of 6/2030 at 2.52%, 5s of 12/2030 at 2.53%, 5s of 6/2035 at 2.87%, 5s of 12/2030 at 2.90%, 5s of 12/2040 at 3.41% and 5s of 12/2041 at 3.54%, callable 12/15/2035.

Jefferies priced for CPS Energy (Aa2/AA-/AA-/) $603.005 million of revenue refunding bonds, New Series 2026A, with 5s of 2/2033 at 2.90%, 5s of 2035 at 2.99%, 5s of 2040 at 3.62% and 5s of 2041 at 3.72%, callable 2/1/2036.

BofA Securities priced for the Fort Worth Independent School District, Texas, (Aaa///) $130.47 million of unlimited tax refunding bonds, Series 2025A, with 5s of 2/2026 at 2.58%, 5s of 2030 at 2.59%, 5s of 2035 at 2.92%, 5s of 2040 at 3.62%, and 5s of 2041 at 3.81%, noncall.

In the competitive market, the California Infrastructure and Economic Development Bank (Aaa/AAA/AAA/) sold $554.625 million of green Clean Water and Drinking Water State Revolving Fund revenue bonds to BofA Securities, with 5s of 10/2026 at 2.14%, 5s of 2030 at 2.00%, 5s of 2035 at 2.30%, 5s of 2040 at 3.12%, 4s of 2045 at 4.08%, and 4.25s of 2050 at 4.29%, callable 10/1/2035.

Fund flows
Investors added $736.2 million from municipal bond mutual funds in the week ended Wednesday, following $682.2 million of inflows the prior week, according to LSEG Lipper data.

High-yield funds saw inflows of $253.3 million compared to inflows of $98.9 million the previous week.

Tax-exempt municipal money market funds saw inflows of $2.212 billion for the week ending Dec. 1, bringing total assets to $146.669 billion, according to the Money Fund Report, a weekly publication of EPFR.

The average seven-day simple yield for all tax-free and municipal money-market funds remained at 2.36%.

Taxable money-fund assets saw $76.73 billion added, bringing the total to $7.453 trillion.

The average seven-day simple yield was at 3.66%.

The SIFMA Swap Index was at 1.92% on Wednesday compared to the previous week’s 2.79%.

AAA scales
MMD’s scale was little changed: 2.48% (-2) in 2026 and 2.43% (-1) in 2027. The five-year was 2.43% (unch), the 10-year was 2.77% (unch) and the 30-year was 4.21% (unch) at 3 p.m.

The ICE AAA yield curve was unchanged: 2.49% in 2026 and 2.46% in 2027. The five-year was at 2.39%, the 10-year was at 2.76% and the 30-year was at 4.16% at 4 p.m.

The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.49% (-1) in 2025 and 2.43% (-1) in 2026. The five-year was at 2.43% (unch), the 10-year was at 2.77% (unch) and the 30-year yield was at 4.19% (unch) at 3 p.m.

Bloomberg BVAL was little changed 2.49% (-1) in 2025 and 2.45% (unch) in 2026. The five-year at 2.39% (unch), the 10-year at 2.74% (unch) and the 30-year at 4.10% (unch) at 4 p.m.

Treasuries were weaker.

The two-year UST was yielding 3.526% (+4), the three-year was at 3.549% (+5), the five-year at 3.681% (+5), the 10-year at 4.107% (+4), the 20-year at 4.723% (+4) and the 30-year at 4.764% (+3) near the close.