Municipals were steady Wednesday as the market saw another heavy slate of new issuance and inflows continued into muni mutual funds. U.S. Treasuries made gains and equities broke more records.
Federal Reserve Board Chair Jerome Powell in a televised interview Wednesday said "little to alter the market's view that the Fed will likely trim rates on Dec. 18," according to BMO Senior Economist Sal Guatieri.
Noting the Fed is "not quite there on inflation but still making progress," Powell said, it remains "on a path to bring rates back to a more neutral level over time."
Still, he noted the economy is "in very good shape," so the Fed can be "a little more cautious" in bringing rates down from restrictive levels.
"The Fed's Beige Book won't interfere with a rate cut," Guatieri said.
The report showed a slight increase in economic activity in most districts, with employment "flat or up only slightly."
Wage growth, it said, "softened to a modest pace," and prices rose modestly as businesses had "greater difficulty passing costs on to customers."
Municipals were little changed, as U.S. Treasury yields fell three to four basis points.
The two-year municipal to UST ratio Wednesday was at 61%, the five-year at 63%, the 10-year at 65% 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 61%, the five-year at 61%, the 10-year at 64% and the 30-year at 80% at 3 p.m.
The Investment Company Institute reported $625 million of inflows into municipal bond mutual funds for the week ending Nov. 26, following $1.221 billion of inflows the previous week. This marks 16 consecutive weeks of inflows, per ICI data.
Exchange-traded funds saw inflows of $966 million after $836 million of inflows the week prior.
Despite the markets seeing some recent "fits and starts,", market technicals are supportive, said Jeff Timlin, a managing partner at Sage Advisory.
Technicals could "break down" if there is a potential decline in risk assets or rising unemployment, particularly in white-collar jobs, he said.
"One of those or both would have to take place to cause a reduction in demand for munis," Timlin said.
Market participants on both the buy-side and sell-side are trying to "tie up loose ends" as the end of the year approaches, he said.
Tuesday saw decent issuance, with most deals coming at fair value, if not a little bit on the richer side, he noted.
"Now that may wane a little bit as that money gets deployed into these new issues this week, so we may see a little bit of spread volatility, but not much," Timlin said.
Issuers are attempting to get their last deals done over the next two weeks, knowing the industry slows in the second half of the month, he said.
This week and next week will be heavier supply weeks before issuance falls off closer to the Christmas holiday and the New Year, Timlin noted.
There were $16 billion in maturities and coupon payments that came due on Dec. 1, giving the market a "little bit of fodder" to put that money to work, he said.
January is typically the third largest month for maturities and coupons coming due. "If that holds, then there's going to be another swab of money that's going to need to be reinvested going into the new year," he said.
Therefore, during the first two weeks of 2025, there may be strength in the market as issuers don't start coming to tap capital markets until mid-January, Timlin said.
"Those first two weeks typically end up being a little bit more of a technical or seasonal strength for being maybe a seller market, not a buyer's market," he said.
In the primary market Wednesday, Goldman Sachs priced for Connecticut (Aa3/AA/AA-/AAA) $768.78 million of transportation infrastructure purposes special tax obligation bonds, Series 2024 A-2, with 5s of 7/2032 at 2.78%, 5s of 2034 at 2.89%, 5s of 2039 at 3.17%, 5s of 2044 at 3.52% and 5s of 2045 at 3.58%, callable 10/1/2034.
Piper Sandler priced for Austin (/AAA/AA+/) $423.17 million in three series. The first tranche, $293.29 million of Series 1 public improvement and refunding bonds, saw 5s of 9/2025 at 2.88%, 5s of 2029 at 2.66%, 5s of 2034 at 2.95%, 5s of 2039 at 3.19% and 5s of 2044 at 3.53%, callable 9/1/2034.
The second tranche, $100.52 million of Series 2024 certificates of participation, saw 5s of 9/2025 at 2.88%, 5s of 2029 at 2.66%, 5s of 2034 at 2.95%, 5s of 2039 at 3.19% and 5s of 2044 at 3.53%, callable 9/1/2034.
The third tranche, $29.36 million of Series 3 public property finance contractual obligations, saw 5s of 5/2025 at 3.03%, 5s of 5/2029 at 2.65%, 5s of 11/2029 at 2.66% and 5s of 11/2031 at 2.77%, noncall.
Barclays priced for the Parish of St. John the Baptist, Louisiana, (A2/A-/A/) $400 million of Marathon Oil Corp. Project non-AMT revenue refunding bonds, Series 2017, Subseries 2017C, with 3.3s of 6/2037 with a mandatory tender date of 7/3/2028 at par, noncall.
J.P. Morgan Securities priced for the Karegnondi Water Authority, Michigan, (/AA//) $163.485 million of BAM-insured Karegnondi Water Pipeline water system refunding bonds, with 5s of 11/2025 at 2.93%, 5s of 2029 at 2.77%, 5s of 203 at 3.08%, 5s of 2039 at 3.33% and 5s of 2043 at 3.53%, callable 11/1/2034.
Primary to come:
The New Jersey Transportation Trust Fund Authority (A2/A-/A/A) is set to price Thursday $1.5 billion of transportation program bonds, 2024 Series CC, serials 2030-2044, terms 2049, 2055. Barclays.
The
The Sales Tax Securitization Corp., Illinois, is set to price Thursday $679.68 million of sales tax securitization refunding bonds, consisting of $142.09 million of refunding bonds, Series 2024A, (/AA-/AAA/AAA), serials 2029, 2031-2044; $404.22 million of second lien sales tax refunding bonds, Series 2024A (/AA-/AA-/AA+), serials 2029-2030, 2032-2041; and $133.37 million of taxable second lien sales tax securitization refunding bonds, Series 2024B, serials 2025, 2027-2029, 2039. RBC Capital Markets.
The Mobile County Industrial Development Authority, Alabama, (Baa3/BBB-//) is set to price $480 million of AM/NS Calvert LLC Project solid waste disposal revenue bonds, Series 2024B. BofA Securities.
The New York City Housing Development Corp. (Aa2/AA+//) is set to price Thursday $397.725 million of sustainable development multi-family housing revenue bonds, consisting of $269.53 million of Series F-1 and $128.195 million of Series F2. Jefferies.
The Cumberland County Industrial Development Facilities and Pollution Control Financing Authority (Aaa///) is set to price Thursday $250 million of Project Aero solid waste disposal revenue bonds, serial 2027. Oppenheimer.
The Colorado Bridge and Tunnel Enterprise (Aa1/AA+//) is set to price Thursday $238.975 million of senior revenue refunding bonds, Series 2024B, serials 2028-2049. Wells Fargo.
The Capital Projects Finance Authority, Florida, is set to price Thursday $144.4 million of PRG - Unionwest Properties LLC Project student housing revenue bonds, consisting of $108.385 million of tax-exempt senior bonds, Series 2024A-1 (Ba1///), serials 2033-2044, terms 2049, 2054, 2058; $7.455 million of taxable senior bonds, Series 2024A-2 (Ba1///), serials 2026-2033; and $28.56 million of tax-exempt subordinate bonds, Series 2024B (nonrated), term 2062. BofA Securities.
Chicago (/BBB+/A-/A) is set to price Thursday $126.595 million of GO refunding bonds, Series 2024B, serials 2025, 2029, 2031-2035. RBC Capital Markets.
The FAU Finance Corp., Florida, (A1//A+/) is set to price Thursday $117.75 million of capital improvement revenue bonds, serials 2027-2044, terms 2049, 2054. BofA Securities.
The Adams County General Authority, Pennsylvania, (//BBB+/) is set to price Thursday $110.815 million of The Brethren Home Community Project revenue bonds, consisting of $91.36 million of Series 2024A, $7.285 million of Series 2024B-1 and $12.16 million of Series 2024B-2. HJ Sims & Co.
Primary market on Tuesday
Raymond James priced for Main Street Natural Gas (A3///) $926.84 million of gas supply revenue bonds, Series 2024E. The first tranche, $90.105 million, saw 5s of 12/2025 at 3.63%, 5s of 2029 at 3.61% and 5s of 2032 at 3.87%, callable 9/1/2032.
The second tranche, $836.735 million, saw 5s of 5/2055 with a mandatory put date of 12/1/2032 at 3.92%, callable 9/1/2032.
Gary Siegel contributed to this story
