Municipals outperform USTs, ratios fall
6 min read
Municipals were weaker Monday following U.S. Treasury market pressures while equities ended down.
Triple-A yields rose up to seven basis points while govies were higher by eight to 12 basis points.
Short ratios fell as a result of the day’s moves. The two-year muni-to-Treasury ratio Monday day was at 61%, the three-year at 61%, the five-year at 61%, the 10-year at 67% and the 30-year at 82%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 64%, the three-year at 64%, the five-year at 64%, the 10-year at 70% and the 30-year at 83% at 4 p.m.
While weaker Monday, municipals have outperformed USTs the past few sessions.
Demand for munis remains “insatiable,” said Daryl Clements, a municipal portfolio manager at AllianceBernstein. This demand has caused munis to outperform USTs and become “relatively more expensive.”
Muni mutual funds have seen 16 straight weeks of inflows, with LSEG Lipper reporting last week $1.718 billion of inflows, led by long-term and investment-grade funds.
This brings year-to-date net flows to $19.1 billion, according to LSEG Lipper.
The large inflows into muni mutual funds last week “helped prop up the market, despite a nearly $14 billion primary calendar that kept up the relentless pace of new issues seen this year,” Birch Creek strategists said in a weekly report.
With a holiday-shortened week, supply was “jammed into two days” and was the main focus for market participants, they said.
“Subscriptions were generally strong, especially given that several of the largest transactions were in the mid-grade space and offered incremental yield,” Birch Creek strategists said.
The
“It’s full steam ahead for the primary market,” as supply last week was the third highest of 2024 and this week’s new-issue calendar at $13.6 billion, is a nearly 50% increase from the one-year weekly average, said Patrick Luby, head of U.S. municipal strategy at CreditSights.
New York, at $3.9 billion, has the largest issuance for any state, with over three-quarters of it coming from two $1.5 billion deals from New York credits. Texas and California follow at $2.1 billion and $1.8 billion, respectively, he noted.
There are a few large deals on the calendar next week to close out October.
California is set to sell Oct. 29 $964 million of tax-exempt and taxable GO refunding bonds in three series.
The New Orleans Aviation Board is set to price next week $597.4 million of general airport revenue bonds.
Philadelphia (A1/A+/A+/) is set to price next week $558.37 million of water and wastewater revenue bonds.
AAA scales
Refinitiv MMD’s scale was cut three to seven basis points: The one-year was at 2.76% (+3) and 2.50% (+3) in two years. The five-year was at 2.49% (+5), the 10-year at 2.84% (+6) and the 30-year at 3.72% (+6) at 3 p.m.
The ICE AAA yield curve was cut two to six basis points in spots: 2.79% (+3) in 2025 and 2.55% (+2) in 2026. The five-year was at 2.51% (+5), the 10-year was at 2.83% (+6) and the 30-year was at 3.66% (+4) at 4 p.m.
The S&P Global Market Intelligence municipal curve saw cuts: The one-year was at 2.78% (+3) in 2025 and 2.55% (+4) in 2026. The five-year was at 2.50% (+6), the 10-year was at 2.80% (+6) and the 30-year yield was at 3.67% (+6) at 4 p.m.
Bloomberg BVAL was cut four to five basis points: 2.77% (+4) in 2025 and 2.52% (+4) in 2026. The five-year at 2.50% (+4), the 10-year at 2.77% (+5) and the 30-year at 3.64% (+5) at 4 p.m.
Treasuries saw losses.
The two-year UST was yielding 4.024% (+8), the three-year was at 3.949% (+9), the five-year at 3.975% (+10), the 10-year at 4.196% (+12), the 20-year at 4.562% (+12) and the 30-year at 4.50 (+12) at the close.
Primary to come
The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price Wednesday $1.5 billion of future tax-secured subordinate bonds, Fiscal 2025 Series D. Siebert Williams Shank.
The New York Transportation Development Corp. is set to price Tuesday $1.5 billion of Assured-insured JFK Airport Terminal 6 Redevelopment Project AMT revenue bonds, consisting of $1.41 billion of Series 2024A (Baa3/BBB-//) and $89.997 million of Series 2024B (A1/AA//AA+/). Goldman Sachs.
The California Community Choice Financing Authority is set to price this week $1.125 billion of Clean Energy Project green revenue bonds, Series 2024D. RBC Capital Markets.
The New York Metropolitan Transportation Authority (A3/A-/AA/AA/) is set to price Tuesday $485 million of climate-certified transportation revenue refunding green bonds. Siebert Williams Shank.
The Comal Independent School District, Texas, (Aaa///) is set to price Tuesday $394.41 million of PSF-insured unlimited tax school building and refunding bonds, serials 2025-2044, term 2049. Baird.
Springfield, Illinois, (A3/AA//) is set to price Tuesday $352.79 million of BAM-insured senior lien electric revenue refunding bonds. J.P. Morgan.
The Connecticut Housing Finance Authority (Aaa/AAA//) is set to price Wednesday $298.155 million of housing mortgage finance program social bonds, Series 2024F, consisting of $206.405 million of tax-exempts, 2024 Subseries F-1, and $91.75 million of taxables, 2024 Subseries F-2. Morgan Stanley.
The Ohio Housing Finance Agency (Aaa///) is set to price Wednesday $275 million of residential mortgage non-AMT social revenue bonds. J.P. Morgan.
The Cerritos Community College District, California, (Aa1/AA//) is set to price Tuesday $222.82 million of GOs, consisting of $100 million of Election of 2022 bonds, Series 2024A, serials 2025-2044, term 2049; and $122.82 million of refunding bonds, Series 2024, serials 2025-2044. RBC Capital Markets.
The Regents of the University of Colorado (Aa1//AA+/) is set to price Wednesday $220.465 million of university enterprise refunding revenue bonds, Series 2024A. Morgan Stanley.
The Katy Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $215.085 million of PSF-insured unlimited tax refunding bonds, serials 2025-2045. BOK Financial Securities.
The Lamar Consolidated Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $190.99 million of PSF-insured unlimited tax refunding bonds, serials 2026-2044. RBC Capital Markets.
Fircrest Properties, Washington, (/AA//) is set to price Wednesday $186.54 million of Washington State Department of Social and Health Services Project lease revenue sustainability bonds, serials 2028-2044, term 2049. BofA Securities.
The Tomball Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $181.465 million of PSF-insured unlimited tax building and refunding bonds, serials 2025-2050. Raymond James.
The Wilkes-Barre Finance Authority, Pennsylvania, (nonrated) is set to price Tuesday $180 million of WoodBridge Healthcare Project hospital revenue bonds. Ziegler.
The Idaho Housing and Finance Association (Aa1///) is set to price $175 million of taxable single-family mortgage bonds, 2024 Series C, serials 2025-2036, terms 2039, 2044, 2049, 2055, 2065. BofA Securities.
The Virginia Small Business Financing Authority (//BBB/) is set to price Thursday $166.685 million of revenue bonds, consisting of $143.665 million of Series 2024A, $9.48 million of Series B-1 entrance fee redemption bonds and $13.54 million of Series B-2 entrance fee redemption bonds. HJ Sims.
The Conroe Independent School District, Texas, (Aaa/AAA//) is set to price Thursday $129.49 million of PSF-insured unlimited tax refunding bonds, serials 2026-2036. Jefferies.
Spokane County, Washington, (A2/A//) is set to price Tuesday $129.145 million of airport revenue bonds, consisting of $34.28 million of non-AMT bonds, Series 2024A, serials 2026-2044, terms 2049, 2054; and $94.865 million of AMT bonds, Series 2024B, serials 2026-2044, terms 2049, 2054. Barclays.
North Slope Borough, Alaska, (/AA/AA/AA+/) is set to price Wednesday $128.745 million of GOs, consisting of $104.085 million of general purpose bonds, Series 2024A, serials 2025-2036; and $24.66 million of school bonds, Series 2024B, serials 2025-2036. Jefferies.
Cuyahoga County, Ohio, (A1/AA-//) is set to price Tuesday $127.6 million of Convention Hotel Project refunding certificates of participation, serials 2025-2044. PNC Capital Markets.
The Maryland Health and Higher Educational Facilities Authority (A1/A+//) is set to price Thursday $117.015 million of Lifebridge Health Issue revenue bonds, terms 2049, 2054. BofA Securities.
The Intermountain Power Agency, Utah, (Aa3//AA-/) is set to price Thursday $114.62 million of tax-exempt and taxable power supply revenue bonds. Goldman Sachs.
The South Carolina Jobs-Economic Development Authority (/BB//) is set to price Tuesday $112 million of Beaufort Medical Hospital & South of Broad Healthcare Project healthcare revenue bonds, serials 2027-2035, terms 2039, 2044, 2049, 2054. BofA Securities.
The California Housing Finance Agency (Aa2/AA//) is set to price Wednesday $107.58 million of affordable housing sustainable revenue bonds. Morgan Stanley.
The Ohio Water Development Authority (/AAA//) is set to price Thursday $102.02 million of Fresh Water Revolving Fund water development refunding revenue bonds, serial 2025-2042. Jefferies.
Competitive:
Highland Park Independent School District, Texas, (Aaa//AAA/) is set to sell $111.865 million of unlimited tax refunding bonds at noon ET Tuesday.
The Virginia Housing Development Authority is set to sell $106 million of taxable rental housing bonds, 2024 Series F, at 11 a.m. Tuesday.
The Collin County Community College District, Texas, is set to sell $171.29 million of consolidated fund revenue bonds at 11:30 a.m. Wednesday.
St. Johns County, Florida, (Aaa/AA+//) is set to sell $105.17 million of special obligation revenue bonds, Series 2024A, at 10:30 a.m. Wednesday.
