Municipals held steady Friday ahead of a sizable $7 billion, new-issue slate with a mix of credits across the spectrum, from healthcare to housing to toll roads and bellwether general obligation issuers. U.S. Treasuries improved across the curve while equities rebounded after another volatile week across markets.
"Bond market investors are all wishing that April was behind us as they are anxious to hear the Fed's statement at its next FOMC meeting," noted BofA Global Research. "The statement should be no surprise as the market consensus has converged to 'higher for longer' rates.
Munis have been less tethered to UST movements but the performance has pushed muni-to-UST ratios higher, "which is hardly surprising given this week was the largest supply week in a long time, and issuance will likely remain robust for now, with the 30-day visible supply remaining relatively high, even after one of the heaviest weeks in recent history," noted Barclays PLC in a weekly report.
The two-year muni-to-Treasury ratio Friday was at 64%, the three-year at 63%, the five-year at 60%, the 10-year at 60% 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 65%, the three-year at 64%, the five-year at 61%, the 10-year at 62% and the 30-year at 82% at 3:30 p.m.
It is hard, Barclays strategists Mikhail Foux and Clare Pickering said, to expect a "sizable muni selloff given that heavy summer redemptions are just around the corner."
They expect muni to UST ratios to move "just slightly higher in the next couple of weeks." To them, it will likely present an opportunity.
Barclays also noted they have been "somewhat cautious" on the direction of fund flows, so they were "pleasantly surprised"
They said this was likely due to higher rates attracting retail investors to fixed income instruments, including munis.
Additionally, outflows from tax-exempt money market funds during tax time were small, as "investors appeared to have paid their taxes utilizing funds in their bank deposit accounts instead of money market accounts," BofA strategists Yingchen Li and Ian Rogow said in a weekly report. "Muni investors appear to have more cash in bank deposits to pay their tax bills this season than in the past."
Li and Rogow also noted this year's issuance has been "robust due to high single-digit new-money growth and the doubling of refunding volume year-over-year."
It appears that April issuance will very likely come in higher than 2023's figures, given the larger calendars the market has already digested so far this month and a few larger deals on tap for the final two days.
Total potential bond volume next week sits at $7.17 billion, a larger calendar for an FOMC week, led by the South Carolina Jobs-Economic Development Authority's $1.912 billion of Novant Health Obligated Group healthcare facilities revenue bonds. Harris County, Texas, is set to price Tuesday $780 million of toll road first lien revenue and refunding bonds while the Port Authority of New York and New Jersey is set to price Tuesday $649.565 million.
Delaware leads the competitive calendar with $298.010 million of GO school bonds and $69.085 million of GO refunding bonds Tuesday.
Going into this year, Barclays strategists said they "frequently highlighted solid value in longer-dated muni bonds, and the long end have actually been doing quite well this year with the high-grade index curves approaching their flattest levels since tightening started in 2023."
At this point, though, they said there is "much less value in bonds with longer maturities, although we would be surprised if the high-grade yield curve flattens even further."
Looking ahead, BofA strategists note that the April employment report may contain more convincing data for a possible market reversal.
Should the longer maturity rally in the Treasury market materialize in the near term as BofA rates strategists contemplated, munis would get its much-anticipated bullish reversal as well. "We believe 'Buy in May and Go Away' should work well for munis this year again," they said.
Barclays strategists had similar sentiments. "At this point we see very few attractive opportunities in the muni space, and would not be surprised if tax-exempts slightly underperform in the near term due to rate volatility," Foux and Pickering said. "We do not believe that this underperformance will be dramatic, and it may even present a buying opportunity as we enter the redemption-heavy summer months.
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 3.45% and 3.22% in two years. The five-year was at 2.85%, the 10-year at 2.81% and the 30-year at 3.96% at 3 p.m.
The ICE AAA yield curve was little changed: 3.43% (-1) in 2025 and 3.23% (unch) in 2026. The five-year was at 2.87% (unch), the 10-year was at 2.87% (+1) and the 30-year was at 3.92% (unch) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 3.47% (unch) in 2025 and 3.24% (unch) in 2026. The five-year was at 2.85% (unch), the 10-year was at 2.85% (unch) and the 30-year yield was at 3.95% (unch), according to a 3 p.m. read.
Bloomberg BVAL was little changed: 3.46% (unch) in 2025 and 3.26% (+1) in 2026. The five-year at 2.79% (unch), the 10-year at 2.78% (unch) and the 30-year at 3.96% (unch) at 3 p.m.
Treasuries were better.
The two-year UST was yielding 4.998% (flat), the three-year was at 4.84% (-1), the five-year at 4.691% (-3), the 10-year at 4.667% (-4), the 20-year at 4.894% (-5) and the 30-year at 4.781% (-4) at the close.
Negotiated calendar
The South Carolina Jobs-Economic Development Authority (A1/A+/AA-/) is set to price Tuesday $1.912 billion of Novant Health Obligated Group healthcare facilities revenue bonds, Series 2024A. J.P. Morgan.
Harris County, Texas, is set to price Tuesday $780 million of toll road first lien revenue and refunding bonds, Series 2024A. Raymond James.
The Port Authority of New York and New Jersey (Aa3/AA-/AA-/) is set to price Tuesday $649.565 million of consolidated bonds, Two Hundred Forty-Fourth Series, serials 2030-2044, terms 2049, 2054. Siebert Williams Shank.
The Board of Regents of the Texas A&M University System (Aaa/AAA/AAA/) is set to price Tuesday $424.51 million of revenue financing system bonds, Series 2024A, serials 2025-2044, terms 2049, 2054. Jefferies.
The Illinois Housing Development Authority (Aaa///) is set to price Tuesday $227.5 million of taxable social revenue bonds, 2024 Series D, serials 2025-2034, terms 2039, 2044, 2049, 2054, 2054. Jefferies.
The authority is also set to price $116.14 million of non-AMT social revenue bonds, 2024 Series C. J.P. Morgan.
The Connecticut Housing Finance Authority (Aaa/AAA//) is set to price Tuesday $245.84 million of social Housing Mortgage Finance Program bonds, 2024 Series C, consisting of $95.84 million of tax-exempts, 2024 Subseries C-1, serials 2025-2036, terms 2039, 2044, 2050, 2054; and $150 million of taxables, 2024 Subseries C-2, serials 2025-2034, terms 2039, 2044, 2049, 2054. RBC Capital Markets.
The New Jersey Higher Education Student Assistance Authority is set to price Thursday $226.550 million of student loan revenue and refunding bonds, Series 2024, consisting of $24.8 million of Series A (/AA//), serials 2027-2033; $176 million of Series B (/AA//), serials 2027-2033, term 2045, and $25.75 million of Series C (/BBB//), serial 2054. RBC Capital Markets.
The New Jersey Health Care Facilities Financing Authority (A2/A-/A/) is set to price Tuesday $163.265 million of Department of Human Services lease revenue refunding bonds, Series 2024, consisting of $109.51 million for the Greystone Park Psychiatric Hospital Project and $53.755 million for the Marlboro Psychiatric Hospital Project. J.P. Morgan.
The Virginia Resources Authority (Aaa/AAA//) is set to price Tuesday $135.73 million of Virginia Pooled Financing Program infrastructure revenue refunding bonds, Series 2024A, serials 2024-2054. Raymond James.
The Nevada Housing Division (/AA+//) is set to price Tuesday $127.395 million of senior single-family mortgage revenue bonds, consisting of $102.395 million of taxables and $25 million on non-AMT bonds. J.P. Morgan.
Fort Bend County, Texas, (/AA//) is set to price Wednesday $123.74 million of senior lien toll road revenue and refunding bonds, Series 2024. Mesirow Financial.
Competitive
Santa Barbara County, California, (/AA+//) is set to sell $102.790 million of 2024 certificates of participation at 11 a.m. eastern Tuesday.
Delaware is set to sell $298.010 million of GO school bonds, Series 2024A, at 10:45 a.m. Tuesday and $69.085 million of GO refunding bonds, Series 2024B, at 11:15 a.m. Tuesday.
The Nauset Regional School District, Massachusetts, is set to sell $120.5 million of unlimited tax GO school bonds, at 11 a.m. Thursday.
The Washoe County School District, Nevada, (Aa3/AA//) is set to sell $130 million of limited tax GO school improvement bonds, Series 2024A, at 11:30 a.m. Thursday.
Jessica Lerner contributed to this report.
