Muni yields fell Tuesday, underperforming a U.S. Treasury rally. Equities ended mixed.
Muni yields fell three to eight basis points, while UST yields fell eight to 11 basis points.
The two-year municipal to UST ratio Tuesday was at 63%, the five-year at 64%, the 10-year at 67% and the 30-year at 86%, according to Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 61%, the five-year at 62%, the 10-year at 65% and the 30-year at 82% at 4 p.m.
"Another week of disruptive headlines from Washington sent bond yields lower [last week] on what may be just the start of flight-to-safety flows," said Matt Fabian, a partner at Municipal Market Analytics.
Munis saw some "advantageous marketing as a haven but were driven to higher prices … less by an energized retail, more by a surge of institutional buying average trade size hit a [year-to-date] high," he said.
"That bid may reflect recently better fund flows, especially by [exchange-traded funds] or a tactical move by some to jump ahead of otherwise modest March reinvestment demand," he said.
On Monday, investors will receive $10 billion from March 1 principal payments, said Pat Luby, head of municipal strategy at CreditSights.
Texas will see the largest principal amount at $1.3 billion, followed by Missouri at $984 million and California at $828 million, he noted.
Redemptions for the entire month are expected to be $20 billion, he said.
Muni prices continue to "show relative resilience" despite a nearly record pace of issuance, according to Fabian.
Supply for the first nine weeks of the year is at $69 billion, just below the $71 billion in 2020, he said.
"This will be tested in the coming weeks if headline risks continue to rise because of the government funding question, the tax reform question, the debt limit question, the federal governments' mass layoffs and accelerated shrinkage, and any number of pressing and emerging issues both legal and political," Fabian said.
That "equities would begin an inconsistent retreat seems a reasonable scenario; same with rising bond yields as this week's PCE data could validate last week's poor consumer confidence number," he said.
And labor readings may underperform, potentially deeply, Fabian said.
"On the other hand, all of the above could help propel fixed income demand, keeping spreads tight in the near term; a longer-term trade up in credit quality and structure is still warranted," he said.
In the primary market Tuesday, BofA Securities priced for the South Carolina Public Service Authority (A3/A-/A-/) $1.025 billion of bonds. The first tranche, $542 million of tax-exempt improvement Series A bonds, saw 5s of 12/2033 at 3.25%, 5s of 2035 at 3.37%, 5s of 2040 at 3.70%, 5s of 2045 at 4.19%, 5.25s of 2050 at 4.33%, 5s of 2050 at 4.28% (Assured Guaranty-insured), 5s of 2055 at 4.44% and 5s of 2055 at 4.34% (Assured Guaranty-insured), callable 6/1/2035.
The second tranche, $424.985 million of tax-exempt refunding Series B bonds, 5s of 12/2025 at 2.82%, 5s of 2040 at 3.00%,5s of 2035 at 3.37%, 5s of 2039 at 3.63%, 5s of 2045 at 4.19% and 5s of 2048 at 4.31%, callable 6/1/2035.
The third tranche, $58 million of taxable improvement Series C bonds, saw all bonds price at par: 4.57s of 12/2026, 4.73s of 2029, and 5.03s of 2033.
Wells Fargo priced for the Bay Area Toll Authority $341.105 million of San Francisco Bay Area toll bridge revenue bonds. The first tranche, $296.035 million of 2025 Series F-1 (NR/AA/AA/), saw 5s of 4/2026 at 2.38%, 5s of 2030 at 2.38%, 5s of 2035 at 2.66%, 5s of 2040 at 3.12%, 5s of 2045 at 3.66%, 5s of 2048 at 3.80% and 5s of 2053 at 3.91%, callable 4/1/2035.
The second tranche, $45.07 million of 2025 Series SSL-1 (NR/AA-/AA-/), saw 5s of 4/2032 at 2.53% and 5s of 2034 at 2.66%, noncall.
BofA Securities priced for the Missouri Joint Municipal Electric Utility Commission (A2//A/) $200.99 million of Prairie State Project power project revenue refunding bonds, with 5s of 12/2025 at 2.72%, 5s of 2030 at 2.94%, 5s of 2034 at 3.25% and 5s of 2039 at 3.49%, callable 6/1/2035.
In the competitive market, the Fullerton Joint Union High School District, California, (Aa2/AA//) sold $120 million of Election of 2024 GOs, Series A, to BofA Securities, with 8s of 8/2026 at 2.25%, 5s of 2030 at 2.34%, 5s of 2035 at 2.63%, 5s of 2040 at 3.04%, 4s of 2045 at 3.80%, 4s of 2051 at par and 4s of 2054 at 4.04%, callable 8/1/2034.
Maury County, Tennessee, (Aa2///) sold $100 million of GOs to BofA Securities, with 5s of 4/2026 at 2.65%, 5s of 2030 at 2.75%, 4s of 2035 at 3.30%, 4s of 2040 at 3.70% and 4s of 2045 at 4.12%, callable 4/1/2032.
Washoe County School District, Nevada, (Aa2/AA//) sold $100 million of limited tax GO school improvement bonds to Truist, with 5s of 10/2026 at 2.65%, 5s of 2030 at 2.78%, 5s of 2035 at 3.09%, 5s of 2040 at 3.43%, 4s of 2045 at 4.07%, 4s of 2049 at 4.20% and 4s of 2054 at 4.25%, callable 4/1/2035.
AAA scales
MMD's scale was bumped four to eight basis points: The one-year was at 2.56% (-4) and 2.58% (-4) in two years. The five-year was at 2.65% (-4), the 10-year at 2.88% (-8) and the 30-year at 3.92% (-5) at 3 p.m.
The ICE AAA yield curve was bumped five to six basis points: 2.61% (-5) in 2026 and 2.56% (-6) in 2027. The five-year was at 2.65% (-6), the 10-year was at 2.88% (-6) and the 30-year was at 3.84% (-5) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped three to six basis points: The one-year was at 2.60% (-3) in 2025 and 2.60% (-3) in 2026. The five-year was at 2.67% (-5), the 10-year was at 2.90% (-6) and the 30-year yield was at 3.86% (-6) at 4 p.m.
Bloomberg BVAL was bumped five to seven basis points: 2.50% (-5) in 2025 and 2.56% (-5) in 2026. The five-year at 2.64% (-6), the 10-year at 2.88% (-7) and the 30-year at 3.86% (-6) at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 4.095% (-8), the three-year was at 4.085% (-9), the five-year at 4.125% (-11), the 10-year at 4.29% (-11), the 20-year at 4.586% (-10) and the 30-year at 4.543% (-11) near the close.
Primary to come
The Black Belt Energy Gas District (Baa1/NR/NR/NR/) is set to price $900 million of gas project revenue bonds, 2025 Series B. Goldman Sachs.
The Pennsylvania Turnpike Commission (Aa3///) is set to price Thursday $602.81 million of turnpike revenue bonds. RBC Capital Markets.
The New York City Municipal Water Finance Authority (Aa1/AA+/AA+/) is set to price Wednesday $600 million of water and sewer second general resolution revenue bonds, Fiscal 2025 Series BB, serials 2043-2044, 2048, 2050, 2052-2053, 2055. BofA Securities.
Auburn University (Aa2/AA-/NR/NR/) is set to price Wednesday $333.435 million of general fee revenue bonds, consisting of $139.715 million of Series 2025A and $193.72 million of Series 2025B. Jefferies.
The Idaho Housing and Finance Association (Aaa/AA+/NR/NR/) is set to price Wednesday $318.015 transportation expansion and congestion mitigation fund sales tax revenue bonds, Series 2025A, serials 2026-2045, 2050, term 2049. BofA Securities.
The Carroll City-County Hospital Authority, Georgia, (Aa2/AA//) is set to price Wednesday $175.72 million of Tanner Medical Center project refunding revenue anticipation certificates, serials 2026-2045, terms 2050, 2055. Raymond James.
The Board of Governors of the Colorado State University System is set to price Wednesday $108.74 million of non-rated system enterprise revenue and revenue refunding bonds, Series 2025B, term 2055. Morgan Stanley.
The Massachusetts Development Finance Agency (Aa3/AA-/NR/NR/) is set to price Thursday $100 million of Boston University Issue refunding revenue bonds, Series 2025B-2, terms 2048, 2048. Barclays.
The Industrial Development Authority of the city of Phoenix and Industrial Development Authority of the county of Maricopa (Aa1///) is set to price Wednesday $100 million of non-AMT single-family mortgage revenue bonds, 2025 Series, serials 2027-2037, terms 2040, 2045, 2050, 2055, 2056. Stifel.
Competitive
The Virginia Public Building Authority (Aa1/AA+/AA+/) is set to sell $324.06 million of public facilities revenue bonds, Series 2025A, at 10:45 a.m. Wednesday.
The Springfield Board of Public Utilities, Missouri, is set to sell $275.53 million of certificates of participation at noon Wednesday.
Hoboken, New Jersey, is set to sell $172.019 million of bond anticipation notes at 11 a.m. Wednesday.
