Municipals were narrowly mixed Tuesday, ignoring larger U.S. Treasury market losses while stocks ended their breakneck pace of post-election gains to close the session down.
Triple-A yield curves showed a mix of one to three basis point bumps and cuts, depending on the curve, while USTs saw losses of up to 12 basis points on the 10-year near the close.
The day's moves pushed relative value downward. The two-year municipal to UST ratio Tuesday was at 61%, the three-year at 60%, the five-year at 62%, the 10-year at 67% and the 30-year at 83%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 62%, the three-year at 61%, the five-year at 63%, the 10-year at 68% and the 30-year at 84% at 4 p.m.
Municipals are outperforming USTs month- and year-to-date. The Bloomberg Municipal Index is at positive 0.52% in November and returning 1.33% in 2024 while USTs are flat in November and at positive 1.37% year to date.
The Bloomberg High-Yield Index is returning 0.65% in November and 6.53% year-to-date while taxable munis are at positive 0.37% so far this month and 2.80% in 2024.
That outperformance is likely to grow after the little changed muni trading session Tuesday that followed a
Triple-A yields fell 13 to 22 basis points through Friday after Wednesday's post-election highs, which helped "stimulate" demand, said Pat Luby, head of municipal strategy at CreditSights.
Demand toward the end of the week was also partially driven by reinvestment demand. Nov. 1 saw $14.3 billion of principal paid out, along with $7 billion of interest, Luby said.
Bond Buyer 30-day visible supply is at $10.56 billion, down significantly from the highs reached in the months leading up to the election.
Any rebound in supply may be impeded by the limited number of full, uninterrupted weeks left in 2024, Mukherjee said.
After the shortened week of Thanksgiving, there are only three full five-day weeks in December, Luby noted.
Despite this, there are still some large deals coming onto the forward calendar after this week's roughly $6 billion.
Houston is set to price Nov. 19 $1 billion of AMT United Airlines Terminal Improvement Projects airport system special facilities revenue bonds.
The Maricopa County Industrial Development Authority is set to sell Nov. 21 $520 million of Grand Canyon University Project education revenue bonds.
The Greater Aviation Authority is set to price the week of Dec. 2 $843 million of Orlando International Airport airport facilities revenue bonds.
Elsewhere, muni mutual funds saw $1.263 billion of inflows last week, marking 19 straight weeks of inflows, according to LSEG Lipper.
"Starting about now, we anticipate that net new-money flows into mutual funds will slow down, as investors and financial advisors have learned to avoid buying mutual funds late in the year when they could be at risk of receiving a taxable capital gains distribution," Luby said.
However, a "slowdown" in fund flows over the next six to eight weeks does not necessarily mean investor demand will wane, he noted.
AAA scales
Refinitiv MMD's scale was slightly firmer five years and in: The one-year was at 2.81% (-2) and 2.65% (-2) in two years. The five-year was at 2.66% (-2), the 10-year at 2.96% (unch) and the 30-year at 3.79% (unch) at 3 p.m.
The ICE AAA yield curve was cut up to three basis points: 2.92% (+2) in 2025 and 2.69% (+2) in 2026. The five-year was at 2.68% (+3), the 10-year was at 2.95% (+2) and the 30-year was at 3.77% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.85% (-1) in 2025 and 2.67% (-1) in 2026. The five-year was at 2.62% (unch), the 10-year was at 2.92% (unch) and the 30-year yield was at 3.71% (unch) at 4 p.m.
Bloomberg BVAL was unchanged: 2.83% in 2025 and 2.64% in 2026. The five-year at 2.69%, the 10-year at 2.97% and the 30-year at 3.71% at 4 p.m.
Treasuries saw losses.
The two-year UST was yielding 4.338% (+8), the three-year was at 4.303% (+10), the five-year at 4.314% (+12), the 10-year at 4.431% (+12), the 20-year at 4.70% (+11) and the 30-year at 4.578% (+10) at the close.
Primary to come
The Black Belt Energy Gas District (A1///) is set to price Wednesday $1 billion of gas project revenue bonds. Goldman Sachs.
The California Public Finance Authority is set to price next week $455.105 million of The James senior living revenue bonds, consisting of $441.405 million of Series 2024A and $13.7 million of Series 2024B. HJ Sims.
The Los Angeles Department of Water and Power (Aa2/AA-//AA) is set to price Thursday $448.71 million of power system revenue refunding bonds, serials 2028-2036, 2039, 2048, 2054. Wells Fargo.
The Los Angeles Community College District (Aaa/AA+//) is set to price Thursday $300 million of general obligation bonds. Goldman Sachs.
The Maryland Department of Transportation (A1//A+/) is set to price Thursday $223.94 million of Baltimore/Washington International Thurgood Marshall Airport AMT special transportation project revenue bonds. J.P. Morgan.
The Virginia Housing Development Authority (Aa1/AA+//) is set to price Wednesday $164.175 million of rental housing bonds, non-AMT, serials 2027-2036, terms 2039, 2044, 2049, 2054, 2059, 2066. BofA Securities.
The Massachusetts Housing Finance Agency (Aa2/AA+//) is set to price Thursday $160.26 million of non-AMT sustainability housing bonds, consisting of $42.285 million of Series B-1, serials 2028-2037, terms 2039, 2044, 2049 2054, 2059, 2064, 2067, and $116.975 million of Series B-3, serials 2027-2029. RBC Capital Markets.
The EP Essential Housing WF PFC (/A+//) is set to price Wednesday $145.925 million of residential development revenue bonds HOME Essential Function Housing Program (Retreat at Mesa Hills Project), serials 2034. KeyBanc Capital Markets.
The Public Finance Authority is set to price Wednesday $124.835 million of Million Air Three LLC General Aviation Facilities Project special facility revenue refunding bonds, consisting of $47.485 million of Series 2024A tax-exempt refunding AMT, terms 2030, 2035, 2046; and $77.35 million of taxable refunding Series 2024B, terms 2035, 2054. Raymond James.
The Pasadena Public Financing Authority (/AA+//) is set to price Wednesday $106.349 million of Rose Bowl Renovation Project lease revenue refunding bonds consisting of $58.525 million of Series CIB, serials 2025-2039, and $115.395 million of Series CABs, serials 2039-2048. Stifel, Nicolaus & Co.
Competitive
The Allen County Building Corp., Indiana, (Aa2///) is set to sell $202.67 million of ad valorem property tax back-up lease rental revenue bonds at 11 a.m. eastern Wednesday.
King County, Washington, (Aaa/AAA/AAA/) is set to sell $103.9 million of unlimited tax general obligation bonds at 10:45 a.m. Wednesday.
