Municipals were little changed Friday ahead of the holiday weekend as U.S. Treasuries lost ground while stocks rallied.
Triple-A yields closed the week little changed while USTs saw yields rise three to five basis points.
The two-year muni-to-Treasury ratio Friday was at 63%, the three-year at 64%, the five-year at 65%, the 10-year at 69% and the 30-year at 86%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 63%, the three-year at 64%, the five-year at 65%, the 10-year at 70% and the 30-year at 87% at 3:30 p.m.
"Looking at relative value, the technical backdrop, highlighted by the front-loading of issuance, has pushed ratios higher from earlier-in-the-year levels, given the Treasury outperformance," said Jeff Lipton, a research analyst and market strategist. "Such cheaper bias has created opportunities for value-oriented investors seeking more attractive entry points as munis displayed greater independence from stronger Treasury market performance."
"The current fixation on the primary market is less likely to change entering September as several $1 billion-plus deals are expected to be priced during the month," noted BofA Global Research strategists.
Investors will see more than $7.8 billion of supply to start off September,
The Bond Buyer 30-day visible supply sits at $13.97 billion.
Going to September, BofA's expected issuance for the month is $38 billion.
"The speculation of a much larger calendar than our forecast has little supporting evidence," they said, noting that principal redemptions and coupon payments in September are also expected at $38 billion.
Because supply/demand is more balanced, "we believe investors can take time to add duration."
"Hedged investors should be concentrating on dynamically adjusting hedge ratios around key macro data dates," BofA's Yingchen Li and Ian Rogow said. "We suggest adding some hedges going into September as such a posture will likely work until the Fed meeting."
Entering the summer season, "munis were set up nicely and as we embrace back-to-school mode, munis remain well-positioned to offer compelling value," Lipton said.
Lipton said the muni story in 2024 has been more about yield and income opportunities, "despite more recent yield declines, and less about performance for general market investment-grade securities, with the high-yield muni sector being the obvious performance outlier with extremely generous returns."
"Should rates hold steady, we can expect income accruals to push year-end high yield performance to well over 7% returns," he said.
Lipton said the most notable cash-flow opportunities for general market investment-grade munis can be found along the 7- to 15 year maturity part of the curve.
"Should absolute yields and ratios trend lower, the argument to deploy more sidelined cash into munis remains compelling given the need to get invested and the tax-efficient nature of the asset class," Lipton said. "Having said this, certain buyer classes are still seeking wider valuations and we have seen more active allocations into longer-duration funds.
"As expected, fund flows have demonstrated more consistently positive activity with high-yield being the largest recipient and separately managed accounts (SMAs) and exchange-traded funds (ETFs) still displaying notable inflows," Lipton added.
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 2.53% and 2.45% in two years. The five-year was at 2.42%, the 10-year at 2.71% and the 30-year at 3.60% at 3 p.m.
The ICE AAA yield curve was little changed: 2.52% (unch) in 2025 and 2.46% (unch) in 2026. The five-year was at 2.43% (unch), the 10-year was at 2.68% (unch) and the 30-year was at 3.60% (unch) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.57% (unch) in 2025 and 2.51% (unch) in 2026. The five-year was at 2.44% (unch), the 10-year was at 2.68% (unch) and the 30-year yield was at 3.59% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.52% in 2025 and 2.46% in 2026. The five-year at 2.45%, the 10-year at 2.68% and the 30-year at 3.60% at 3:30 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.928% (+3), the three-year was at 3.79% (+4), the five-year at 3.713% (+5), the 10-year at 3.915% (+5), the 20-year at 4.295% (+5) and the 30-year at 4.205% (+5) at the close.
Primary to come:
The North Texas Tollway Authority is set to price $1.126 billion of system revenue refunding bonds Thursday, consisting of $446.145 million of Series 1 Tier (Aa3/AA-//), serials 2026-2038, 2041-2045, and $679.875 million of Series Tier 2 (A1/A+//), serials 2026-2028, 2030-2037. BofA Securities.
The Black Belt Energy Gas District (A2///) Is set to price Tuesday $903.395 million of gas project revenue bonds, Series B. Goldman Sachs & Co.
The San Diego Unified School District (Aa2//AAA/AAA) is set to price Thursday $518.465 million of dedicated unlimited ad valorem property tax general obligation bonds, consisting of $328.465 million of Series H-2 and $190 million of Series B-3. Goldman Sachs.
The San Diego Unified School District (Aa2//AAA/AAA) is also set to price Thursday $151.535 million of taxable dedicated unlimited ad valorem property tax bonds, consisting of $21.535 million of Series H-1, $12.45 million of Series B-1 and $117.55 million of Series B-2. Goldman Sachs.
The Michigan State Housing Development Authority (/AA+//) is set to price $426.12 million of non-AMT rental housing revenue bonds, Series A, serials 2026-2036, terms 2039, 2044, 2049, 2054, 2059, 2064, 2067. BofA Securities.
The
The Curators of the University of Missouri (Aa1/AA+//) is set to price Wednesday $364.785 million of system facilities revenue bonds. Goldman Sachs.
The Allegheny County Sanitary Authority (Aa3/AA-//) is on the day-to-day calendar with $361.595 million of sewer revenue refunding bonds, serials 2024-2044, terms 2049, 2055. PNC Capital Markets LLC.
The Illinois Finance Authority is on the day-to-day calendar with $281 million of Endeavor Health Credit Group (Aa3/AA-//) revenue refunding bonds, serials 2030, 2034. BofA Securities.
The Metropolitan Water District of Southern California (Aa1/AAA//) is set to price Thursday (retail Tuesday) $215.71 million of water and revenue refunding bonds, serials 2025-2046, term 2049. Barclays Capital Inc.
The Cabarrus County Development Corp., North Carolina, (Aa1/AA+/AA+/) is on the day-to-day calendar with $204.63 million of limited obligation refunding bonds, serials 2025-2044. BofA Securities.
Mt. San Antonio Community College District, Los Angeles County, (Aa1/AA//) is set to price Wednesday $189.6 million of election of 2018 general obligation bonds, Series 2024D, serials 2025-2044, terms 2046, 2049. RBC Capital Markets.
Barbers Hill Independent School District, Texas, is set to price Thursday $189.19 million of unlimited tax school building bonds, Series 2024, Piper Sandler & Co.
Baltimore County, Maryland, (Aaa/AAA//) is set to price Wednesday $180.24 million of general obligation bonds, consisting of $76.085 million of Baltimore County Metropolitan District bonds, 2024A refunding Series, serials 2025-2040, term 2043; and $104.155 million of Baltimore County Consolidated Public Improvement bonds, 2024A refunding series, serials 2025-2030. BofA Securities.
The Louisiana Local Government Environmental Facilities and Community Development Authority (A1/A+//) is set to price Thursday $151.435 million of East Baton Rouge Sewerage Commission Projects subordinate lien revenue refunding bonds, Series 2024. J.P. Morgan Securities LLC.
The Florida Housing Finance Corp. (Aaa///) is set to price Wednesday $150 million of Homeowner Mortgage Revenue Bonds, consisting of $110 million of non-AMT 2024 Series 5, serials 2025-2036, terms 2039, 2044, 2049 2054, 2055, and $40 million of taxable refunding bonds 2024 Series 6, serials 2025-2035, terms 2039, 2044, 2049, 2054, 2055. Raymond James & Associates, Inc.
The Mississippi Development Bank (Aa3/AA-//) is set to price Wednesday $148.66 million of Desoto County, Mississippi Highway Refunding Project special obligation refunding bonds, Series 2024A, serials 2025-2032. Wells Fargo Bank, N.A. Municipal Finance Group.
School District 27J, Adams and Weld Counties and City and County of Broomfield, Colorado, (Aa2/AA//) is set to price $128.5 million of general obligation bonds, insured by the Colorado State Intercept Program. RBC Capital Markets.
The Rhode Island Health and Educational Building Corp. (/AA//) is set to price Wednesday $125 million of public schools revenue bond financing program revenue bonds, Series 2024 G (City of Providence Issue), Insured by Build America Mutual Assurance Co., serials 2028-2044. Siebert Williams Shank & Co., LLC.
Lake County, Ohio, (Aa1///) is set to price Thursday $120 million of County Correctional Facilities Series 2024, consisting of $70 million of bonds, serials 2025-2044, terms 2046, 2050, 2052, and $50 million of notes, serials 2025. Stifel, Nicolaus & Company, Inc.
Competitive:
Massachusetts (Aa1/AA+/AA+/) is set to sell $850 million of tax-exempt and taxable general obligation consolidated loan of 2024 bonds in four series Thursday, consisting of $130 million of series C exempts at 10 a.m. eastern, $220 million of Series D exempts at 10:30 a.m., $400 million of Series E exempts at 11 a.m. and $100 million of Series F taxables at 11:30 a.m.
Dane County, Wisconsin, is set to sell $144.61 million of general obligation promissory notes, Series A and $22.085 taxable general obligation promissory notes, Series B, at 11 a.m. eastern Thursday.
