Municipals were steady but with a slightly weaker tone Monday as U.S. Treasuries and equities closed the session mixed.
Triple-A yields were cut up to two basis points, depending on the scale, while USTs were weaker on the short end and slightly better out long.
The two-year municipal to UST ratio Monday was at 61%, the five-year at 63%, the 10-year at 65% and the 30-year at 80%, according to Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 63%, the five-year at 63%, the 10-year at 66% and the 30-year at 80% at 4 p.m.
With the consumer price index coming in line with market expectations last week, data shows inflation remains an issue and pushed yields higher last week, said Jason Wong, vice president of municipals at AmeriVet Securities.
The muni market followed USTs higher, albeit at a "more contained pace," said Birch Creek strategists in a weekly report.
The MMD curve was cut seven to 13 basis points, with returns month-to-date dipping into the red as munis see losses of -0.54%, bringing year-to-date returns lower to 1.99%, Wong said.
While December may be choppy, "with the Fed poised to cut rates by 25 bps at its December meeting and the technical tailwind likely to persist through February, munis should continue to perform," said Daryl Clements, a municipal portfolio manager at AllianceBernstein.
Last week marked the final week of robust issuance for the rest of the year.
Issuance falls to an estimated $2.5 billion this week, led by only one sizable deal: a $1.5 billion deal from the New York Transitional Finance Authority.
Jefferies held a one-day retail order period Monday for $1.5 billion of future tax-secured tax-exempt subordinate bonds, Fiscal 2025 Series E, from the NYC TFA (Aa1/AAA/AAA/), with 5s of 11/2026 at 2.69%, 5s of 2029 at 2.86%, 5s of 2034 at 3.16%, 5s of 2039 at 3.42%, 5.25s of 2044 at 3.74%, 5.25s of 2049 at 3.98% and 4.125s of 2053 at 4.29%, callable 11/1/2034.
Bond Buyer 30-day visible supply is at $4.62 billion while Bloomberg has net negative supply at $12.276 billion.
Net supply for January and February should total negative $19 billion, which is more supportive than the negative $11 billion in 2024 and the negative $16 billion trailing five-year average for this time of year, Clements said.
"Despite these strong technicals, the muni market did realize net outflows" last week, Clements noted.
Muni
High-yield, though, saw inflows, as the sector outperformed IG.
"To cover the outflows and take part in new issues, customer bid lists surged," Birch Creek strategists said.
Accounts also "engaged in broad-based tax loss selling to take advantage of the last weeks of liquidity before year-end," they said.
There was a 62% jump in bid wanteds compared to the trailing five-week average as the market absorbed $3 billion to $4 billion daily, Birch Creek strategists said, citing J.P. Morgan.
As investors start shutting down for the year, there may be some choppy sessions ahead "especially for any accounts that find themselves as forced sellers," they said.
AAA scales
MMD's scale was unchanged: The one-year was at 2.71% and 2.59% in two years. The five-year was at 2.66%, the 10-year at 2.86% and the 30-year at 3.70% at 3 p.m.
The ICE AAA yield curve was unchanged: 2.73% in 2025 and 2.65% in 2026. The five-year was at 2.68%, the 10-year was at 2.89% and the 30-year was at 3.68% at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut up to two basis points: The one-year was at 2.76% (unch) in 2025 and 2.61% (unch) in 2026. The five-year was at 2.62% (+2), the 10-year was at 2.84% (+2) and the 30-year yield was at 3.66% (+2) at 4 p.m.
Bloomberg BVAL was cut unchanged: 2.78% in 2025 and 2.62% in 2026. The five-year at 2.67%, the 10-year at 2.90% and the 30-year at 3.59% at 4 p.m.
Treasuries were little changed.
The two-year UST was yielding 4.244% (flat), the three-year was at 4.220% (flat), the five-year at 4.251% (flat), the 10-year at 4.394% (flat), the 20-year at 4.676% (-1) and the 30-year at 4.604% (flat) at the close.
Primary to come:
The National Finance Authority is set to price Thursday $68.831 million of nonrated River Ranch Project special revenue capital appreciation bonds, terms 2031. D.A. Davidson.
The Hazelden Betty Ford Foundation Project (Baa1///) is set to price $66.945 million of revenue bonds, consisting of $31.79 million of Series A and $35.155 million of Series 2025B. Ziegler.
The Public Finance Authority (//BB-/) is set to price $61.29 million of CFC-LSH-Amplify Lubbock Project multifamily housing revenue bonds, consisting of $54.3 million of Series 2024A-1, $1.465 million of Series 2024A-2 and $5.525 million of Series 2024B. Ziegler.
The Maine Finance Authority is set to price Tuesday $45 million of Casella Waste Systems, Inc. Project solid waste disposal revenue bonds (B1/B+//), serials 2047. BofA Securities.
The Missouri Health and Educational Facilities Authority (//BBB/) is set to price $41.61 million of Lutheran Senior Services Projects senior living facilities revenue bonds, Series 2025A. Ziegler.
