Municipals were weaker for the first session since June 17 as the market saw another busy day of issuance. U.S. Treasury yields rose and equities ended up.
Triple-A yields rose two to six basis points while USTs were higher by two to nine basis points.
The two-year muni-to-Treasury ratio Wednesday was at 65%, the three-year at 66%, the five-year at 67%, the 10-year at 66% and the 30-year at 84%, 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 68%, the five-year at 68%, the 10-year at 68% and the 30-year at 85% at 3:30 p.m.
The Investment Company Institute reported Wednesday $118 million of inflows into municipal bond mutual funds for the week ending June 18 following $110 million of inflows the week prior.
Exchange-traded funds saw inflows at $220 million, following inflows of $458 million the week prior.
Fund flows have not been not consistently positive, but given the confluence of events, they are on track to see more "active" inflows as the summer progresses, said Jeff Lipton, a research analyst and market strategist.
Dealers are pricing primary market transactions "quite efficiently" in what is typically characterized as an "inefficient market," he noted.
Demand remains strong, especially from separately managed accounts, Lipton said, noting that momentum will continue throughout the summer months.
There may be some hesitation around the election, but participation from the SMA investor base will continue into 2025, he said.
Heading into the summer, volume seems "more active" than it ordinarily is, Lipton said.
This is due to less anxiety over Fed policy against the backdrop of a more stable rate environment, and the need for fresh capital, he said.
Issuance this week tops $12 billion, and Wednesday saw an active new-issue calendar.
In the primary market, Loop Capital Markets priced for Los Angeles (MIG-1/SP-1+//) $1.543 billion of 2024 tax and revenue anticipation notes, with 5s of 6/2025 at 3.42%, noncall.
Morgan Stanley held a one-day retail order for $1.083 billion of senior sales tax bonds from the Massachusetts Bay Transportation Authority (/AA+/AAA/AAA/), with 5s of 2025 at 3.14%, 5s of 2029 at 3.00%, 5s of 2034 at 3.00%, 5s of 2039 at 3.28%, 5s of 2044 at 3.64%, 5s of 2048 at 3.82%, and 5s of 2052 at 3.92%.
BofA Securities priced for the Omaha Public Power District (Aa2/AA//) $605.936 million of electric system revenue bonds. The first tranche, $285.576 million of Series 2024A, saw 5s of 2/2026 at 3.18%, 5s of 2029 at 3.05%, 5s of 2034 at 3.12%, 5s of 2039 at 3.44%, 5s of 2044 at 3.79%, 5.5s of 2049 at 3.88% and 5.5s of 2054 at 3.98%, callable 8/1/2033.
The second tranche, $320.36 million of Series 2024B, saw 5s of 2/2025 at 3.30%, 5s of 2029 at 3.05%, 5s of 2034 at 3.12%, 5s of 2039 at 3.44%, 5s of 2044 at 3.79% and 5s of 2045 at 3.83%, callable 8/1/2033.
Barclays priced for the Wisconsin Health and Educational Facilities Authority (/BBB/BBB/) $375.97 million of Marshfield Clinic Health System revenue refunding bonds, Series 2024A, with 5s of 2/2025 at 4.02%, 5s of 2029 at 3.85%, 5s of 2033 at 3.89%, 5/25s of 2036 at 3.98%, 5.5s of 2054 at 4.71%, 5.25s of 2054 at 4.43% (BAM insured) and 4.5s of 2054 at 4.64% (BAM insured), callable 2/15/2034.
BofA Securities priced for the Greater Texas Cultural Education Facilities Finance Corp. (Baa2///) $120.285 million of revenue bonds for the Texas Biomedical Research Institute Project. The first tranche, $98.565 million of tax-exempts, Series 2024A, with 5s of 6/2037 at 3.98%, 5s of 2039 at 4.10%, 5s of 2044 at 4.46%, 5.25s of 2049 at 4.59% and 5.25s of 2054 at 4.67%, callable 6/1/2034.
The second tranche, $21.72 million of taxables, Series 2024B, saw 6.25s of 6/2037 at 6.41%.
Jefferies priced for the Little Elm Independent School District, Texas, (/AAA//) $105.34 million of PSF-insured fixed and variable rate unlimited tax school building bonds, Series 2024, with 5s of 8/2025 at 3.32%, 5s of 2029 at 3.07%, 5s of 2034 at 3.14%, 5s of 2039 at 3.40%, 5s of 2044 at 3.76%, 5s of 2047 at 3.93% and 4 of 2054 at 4.40%, callable 2/15/2034.
In the competitive market, Collin County, Texas, (Aaa/AAA//) sold $198.725 million of limited tax permanent improvement and refunding bonds, Series 2024, to J.P. Morgan, with 5s of 2/2025 at 3.30%, 5s of 2029 at 3.05%, 5s of 2034 at 3.08%, 5s of 2039 at 3.35% and 4s of 2044 at 4.15%, callable 2/15/2034.
The Phoenix Civic Improvement Corp. (Aa1/AAA/AA+/) sold $180 million of subordinated excise tax revenue bonds, Series 2024, to Truist Securities, with 5s of 7/2025 at 3.28%, 5s of 2029 at 3.02%, 5s of 2034 at 3.03%, 5s of 2039 at 3.35% and 5s of 2044 at 3.71%, callable 7/1/2034.
The Little Rock School District (Aa2///) sold $101.885 million of construction bonds, Series B, with 5s of 2/2025 at 3.27%, 5s of 2029 at 3.11%, 4s of 2034 at 3.70%, 4s of 2039 at par, 4s of 2044 at 4.13%, 4s of 2049 at 4.25% and 4.125s of 2052 at 4.32%, callable 8/1/2029.
June supply appears to be finishing above $45 billion, the third highest monthly total in the last 10 years, said Kim Olsan, vice president of municipal bond trading at FHN Financial.
Both 2020 and 2021 saw June volume top $50 billion as "ultra-low rates prevailed," she said.
"Projections for full-year supply continue to notch higher as refunding opportunities present themselves," Olsan said.
The caveat is that most of the issuance may come before the November election cycle — "amidst what are the some of the lowest monthly redemption months of the year," she said.
August through October could see "optimal entry points while post-election through year-end could see spreads tighten," according to Olsan.
AAA scales
Refinitiv MMD's scale was cut three to six basis points: The one-year was at 3.15% (+6) and 3.11% (+6) in two years. The five-year was at 2.89% (+4), the 10-year at 2.84% (+5) and the 30-year at 3.72% (+3) at 3 p.m.
The ICE AAA yield curve was cut three to five basis points: 3.15% (+4) in 2025 and 3.09% (+3) in 2026. The five-year was at 2.92% (+4), the 10-year was at 2.87% (+3) and the 30-year was at 3.72% (+4) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was cut two to three basis points: The one-year was at 3.16% (+2) in 2025 and 3.10% (+2) in 2026. The five-year was at 2.88% (+2), the 10-year was at 2.87% (+2) and the 30-year yield was at 3.70% (+3) at 3 p.m.
Bloomberg BVAL was cut three to four basis points: 3.17% (+3) in 2025 and 3.12% (+3) in 2026. The five-year at 2.92% (+4), the 10-year at 2.84% (+4) and the 30-year at 3.73% (+3) at 3:30 p.m.
Treasuries were weaker.
The two-year UST was yielding 4.746% (+2), the three-year was at 4.526% (+7), the five-year at 4.335% (+8), the 10-year at 4.319% (+9), the 20-year at 4.560% (+9) and the 30-year at 4.450% (+8) at 3:45 p.m.
Negotiated calendar
The Connecticut Health and Educational Facilities Authority is set to price Thursday $337 million of Yale New Haven Health Issue tax-exempt self-liquidity weekly VRDNs revenue bonds, Series 2024C. Barclays,
The State Building Authority of Michigan (Aa2//AA/) is set to price $130 million of revenue refunding bonds for the Facilities Program, Series II, serials 2024-2044, terms 2049, 2054, 2059. Jefferies.
The Lewisville Independent School District, Texas, (/AAA//) is set to price Thursday $112.265 million of PSF-insured unlimited tax school building and refunding bonds, serials 2025-2044. Siebert Williams Shank.
The Kings Local School District, Ohio, (/AA//) is set to price Thursday $100 million of school improvement unlimited tax general obligation bonds, Series 2024. RBC Capital Markets.
Competitive
Augusta, Georgia, is set to sell $126.785 million of water and sewerage revenue refunding and improvement bonds, Series 2024, at 10:30 a.m. eastern Thursday.
