Munis see small cuts out long

Municipals were slightly weaker out long ahead of a smaller new-issue calendar. U.S. Treasuries cheapened and equities ended mixed.

The two-year muni-UST ratio Friday was at 60%, the five-year at 63%, the 10-year at 75% and the 30-year at 93%, 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.

Despite Treasury yields trending “slightly higher this month, tax-exempt muni total returns have been mildly positive,” according to Barclays strategists led by Mikhail Foux.

Munis are seeing gains of 0.70% month-to-date, bringing year-to-date returns to 0.15%. High-yield munis are seeing positive returns of 0.38% so far in August but still losses of 1.46% YTD.

Trading activity will drop off in the coming weeks, while the primary market will remain fairly active, Barclays strategists said.

Any rallies in the investment-grade market aren’t likely to start in August or even September, they said.

Gross issuance for September “will likely be above average” and net issuance will range “in the low- to mid-$20 billion [area],” Barclays strategists said.

“September is rarely a good market for tax-exempts, [as] munis have typically underperformed Treasuries in recent years with last year being the only exception and moreover dealers are rather heavy at the moment with their long-dated inventories at the highest level since early summer,” they said.

Much is still uncertain awaiting the next Federal Open Market Committee meeting, but Barclays strategists expect “the market will most likely move sideways for the time being.”

The high-yield muni market has seen investors in on Brightline Trains Florida, which “rolled its bonds for the next year,” they said.

There has been a slight recovery in “Brightline’s bonds as well as other HY bonds in the aftermath of this bond roll,” they said.

“Year-to-date, the total return of the HY index is still in negative territory, with transportation by far the worst-performing sector, although it is up more than 1% this month,” said Barclays strategists.

The performance of the muni market has been largely affected by “a continued confusing outlook on inflation, large muni new issuance and investors’ short duration preference,” but depending on whether the “economic slowing becomes a consensus,” issuers may dial back new issuance needs, according to BofA strategists.

Treasuries are likely to behave in an “opposite manner” in this case, since the asset class has “a substantial overseas investor base,” unlike munis’ buyer base, which is mostly domestic investors.

New-issue calendar
Issuance for the week of Aug. 18 remains elevated at an estimated at $6.166 billion, with $5.065 billion of negotiated deals and $1.101 billion of competitive deals on tap, according to LSEG.

The New York City Transitional Finance Authority leads the negotiated calendar with $1.388 billion of building aid revenue bonds.

The competitive calendar is led by the Louisville/Jefferson County Metro Government Board of Water Works with $231.05 million of water system revenue bonds.

AAA scales
MMD’s scale was cut two basis points eight years and out: The one-year was at 2.23% (unch) and 2.25% (unch) in two years. The five-year was at 2.41% (unch), the 10-year at 3.24% (+2) and the 30-year at 4.60% (+2) at 3 p.m.

The ICE AAA yield curve was unchanged: 2.22% in 2026 and 2.20% in 2027. The five-year was at 2.40%, 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 cut two basis points out long: The one-year was at 2.22% (unch) in 2025 and 2.24% (unch) in 2026. The five-year was at 2.40% (unch), the 10-year was at 3.23% (+2) and the 30-year yield was at 4.59% (+2) at 4 p.m.

Bloomberg BVAL was cut up to two basis points: 2.22% (unch) in 2025 and 2.24% (unch) in 2026. The five-year at 2.39% (+1), the 10-year at 3.17% (+1) and the 30-year at 4.58% (+2) at 4 p.m.

Treasuries were weaker.

The two-year UST was yielding 3.758% (+3), the three-year was at 3.724% (+3), the five-year at 3.844% (+3), the 10-year at 4.325% (+4), the 20-year at 4.901% (+5) and the 30-year at 4.923% (+5) near the close.

Primary to come
The New York City Transitional Finance Authority (Aa2/AA/AA/) is set to price Wednesday $1.388 billion of building aid revenue bonds, consisting of $868.09 million of Fiscal 2026 Series S-1, $500.61 million of Fiscal 2026 Series S-2, and $19.02 million of Fiscal 2026 Series S-3. RBC Capital Markets.

The Los Angeles County Public Works Financing Authority (/AA+/AA+/) is set to price Wednesday $826.315 million of lease revenue bonds, Series 2025J. BofA Securities.

Louisiana (Aa2/AA//) is set to price Monday $390.43 million of gasoline and fuels tax revenue refunding bonds, Series 2025B. J.P. Morgan.

The Philadelphia Housing Authority (/AA-/AA/) is set to price Tuesday $302.515 million of guaranteed revenue bonds (PHADC Acquisition Program), Series 2025A. PNC.

The Austin Independent School District, Texas, (Aaa///AAA/) is set to price Monday $243.39 million of PSF-insured unlimited tax school building bonds. Cabrera Capital Markets. 

The Capital Trust Authority is set to price $149.96 million of unrated senior living facilities revenue bonds (Grand Villa Portfolio Project), consisting of $143.18 million of Series 2025A and $6.78 million of Series 2025T. Mesirow Financial.

The Port Arthur Independent School District, Texas, (Aaa///) is set to price Thursday $147.2 million of PSF-insured unlimited tax school building bonds. SAMCO Capital Markets.

The Clovis Unified School District, California, (/AA//) is set to price Tuesday $134.195 million of GOs, consisting of $125 million of Series A bonds and $9.195 of Series 2025 refunding bonds. Stifel.

The Public Finance Authority (Aa3///) is set to price Tuesday $134.19 million of municipal certificates (Cuyahoga River Capital Portfolio), Series 2025-1, Class A. J.P. Morgan.

Garland, Texas, (/AA+/AA+/) is set to price Tuesday $131.115 million of taxable GO pension bonds. Piper Sandler.

The Maine State Housing Authority (Aa1/AA+//) is set to price Tuesday $125 million of social mortgage purchase bonds, Series 2025C. Barclays.

The Mississippi Home Corp. (Aa1///) is set to price Tuesday $123.955 million of single-family mortgage revenue bonds, consisting of $100 million of non-AMT Series 2025C bonds and $23.955 million of taxable Series 2025D bonds. Wells Fargo.

The Montana Facility Finance Authority (//A+/) is set to price Thursday $113.4 million of revenue bonds (Benefis Health System Obligated Group), consisting of $63.4 million of Series 2025A and $50 million of Series 2025B. Barclays Capital.

The Saratoga County Capital Resource Corp. (/AA-//) is set to price Tuesday $109.845 million of tax-exempt lease revenue bonds (WSWHE BOCES Project). KeyBanc Capital.

The Beaver Water District of Benton and Washington Counties, Arkansas, ( /AA+//) is set to price Tuesday $100.185 million of water revenue bonds. Crews & Associates.

Competitive:
The Louisville/Jefferson County Metro Government Board of Water Works (Aaa/AAA//) is set to sell $231.05 million of water system revenue bonds at 11 a.m. Eastern Thursday.

Minneapolis, Minnesota, is set to sell $140.465 million of GOs at 10:45 a.m. Wednesday.

Madison, Wisconsin, is set to sell $130.065 million of GO promissory notes, Series 2025D, at 11 a.m. Tuesday.