Municipals were firmer Friday, paring losses from the two-day extended rout, as they followed U.S. Treasury yields lower, but to a lesser degree. Equities ended down.
Muni yields were bumped up to six basis points, depending on the scale, while UST yields fell eight to 10 basis points.
"A volatile macro market, inflation uncertainty and weak demand/supply seasonality in March/April all contributed to rising muni yields," BofA strategists said.
Outside of several trading sessions where munis firmed, like Friday, yields rose across the curve "fairly consistently" this month, while ratios either approached or exceeded the cheapest levels of the past three years, BofA strategists said.
The two-year municipal to UST ratio Friday was at 70%, the five-year at 74%, the 10-year at 78% and the 30-year at 92%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 72%, the 10-year at 75% and the 30-year at 90% at 4 p.m.
Over the past week, munis, for the most part, struggled, with "ratios moving higher across the curve, while Treasury yields actually moved in the opposite direction, making the situation even more painful for investors who hedge their portfolios with USTs," said Barclays strategists Mikhail Foux and Grace Cen.
However, they noted this reaction is not "overly unusual" at this time of year, as tax-exempts usually underperform USTs from early February until late May — at least over the past several years.
This year, muni-UST ratios have been selling off "more aggressively" than normal, with the 10-year MMD-UST ratios rising 11 percentage points in the past eight weeks, while they have moved on average seven percentage points higher from Feb. 1 to May 31 in the past three years, Barclays strategists said.
"The current selloff has been centered on better-quality names, since AAAs/AAs have underperformed the most, as they have been easier to sell, while yields of lower-rated names have not moved wider to the same degree, and these names have actually outperformed thus far, but this dislocation is likely temporary," they said.
Overall, tax-exempts have become "quite attractive," but the market environment will likely remain challenging in the near-term, and munis may cheapen further in the next several weeks, Barclays strategists said.
New-issue calendar
Issuance for the week of March 31 is at $9.29 billion, with $8.011 billion of negotiated deals and $1.28 billion of competitive deals on tap.
The competitive calendar is led by the Gwinnett County School District, Georgia, (Aaa/AAA//) with $332.67 million of GO refunding bonds.
AAA scales
MMD's scale was bumped up to three basis points: The one-year was at 2.66% (unch) and 2.75% (unch) in two years. The five-year was at 2.93% (unch), the 10-year at 3.30% (-2) and the 30-year at 4.28% (-3) at 3 p.m.
The ICE AAA yield curve was bumped two to six basis points: 2.73% (-2) in 2026 and 2.76% (-2) in 2027. The five-year was at 2.95% (-3), the 10-year was at 3.28% (-5) and the 30-year was at 4.27% (-5) at 4 p.m.
The S&P Global Market Intelligence municipal curve bumped up to three basis points: The one-year was at 2.66% (unch) in 2025 and 2.73% (unch) in 2026. The five-year was at 2.93% (unch), the 10-year was at 3.29% (unch) and the 30-year yield was at 4.27% (-3) at 4 p.m.
Bloomberg BVAL bumped one to four basis points: 2.58% (-1) in 2025 and 2.68% (-1) in 2026. The five-year at 2.89% (-2), the 10-year at 3.22% (-2) and the 30-year at 4.24% (-4) at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 3.912% (-8), the three-year was at 3.901% (-9), the five-year at 3.985% (-10), the 10-year at 4.258% (-10), the 20-year at 4.653% (-9) and the 30-year at 4.635% (-9) near the close.
Primary to come
California (Aa2/AA-/AA/) is set to price Wednesday $2.62 billion of GOs, consisting of $1.217 billion of new-issue bonds and $1.403 billion of refunding bonds. J.P. Morgan.
The
The California Educational Facilities Authority is set to price Thursday $600 million of University of Southern California revenue bonds, Series 2025A. Jefferies.
The J. Paul Getty Trust, California, (Aaa/AAA//) is set to price Thursday $500 million of taxable corporate CUSIPs, Series 2025A. Jefferies.
The San Francisco Public Utilities Commission (Aa2/AA-//) is set to price Wednesday $464.745 million of San Francisco water revenue refunding bonds, consisting of $377.76 million of green water and sewer improvement project bonds, Series 2025A, serials 2025-2047; $58.49 million of regional water and local water bonds, Series 2025B, serials 2025-2047; and $28.495 million of Hetch Hetchy water bonds, Series 2025C, serials 2025-2047. Jefferies.
The Michigan State Housing Development Authority (Aa2/AA+//) is set to price Tuesday $337.245 million of non-AMT social single-family mortgage revenue bonds, 2025 Series A, serials 2026-2036, terms 2040, 2045, 2050, 2055, 2055. RBC Capital Markets.
Kansas City, Missouri, (/AA-/AA-/) is set to price Wednesday $274.7 million of special obligation bonds, consisting of $35.175 million of tax-exempt Series 2025B bonds, serials 2026-2055; $128.315 million of tax-exempt Series 2025C bonds, serials 2026-2040; and $111.21 million of taxable Series 2025 bonds, serials 2026-2027, 2035-2040. Stifel.
Austin, Texas, (A1/A+//AA-/) is set to price Wednesday $228.18 million of AMT airport system revenue refunding bonds, serials 2026-2044. Siebert Williams Shank.
Rochester, Minnesota, (Aa2/AA//) is set to price Wednesday on
The Clackamas Community College District, Oregon, (Aa1///) is set to price Tuesday $149 million of general obligation and refunding bonds, Series 2025, insured by the Oregon School Bond Guaranty Act. Piper Sandler.
The Frenship Independent School District, Texas, (Aaa//AAA/) is set to price Tuesday $146.685 million of PSF-insured unlimited tax school building bonds, serials 2026-2051, term 2055. Frost Bank.
Cleveland, Ohio, (A2/A/A-/) is set to price Wednesday $125.525 million of non-AMT airport system revenue bonds, Series 2025A, serials 2026-2033.
The Matanuska-Susitna Borough, Alaska, (/AA+/AA+/) is set to price Wednesday $110.36 million of GOs, consisting of $31.97 million of school bonds, Series A; $47.815 million of school refunding bonds, Series B; $10.295 million of transportation system refunding bonds, Series C; and $20.28 million of taxable transportation system bonds, Series D. RBC Capital Markets.
The Maine Turnpike Authority is set to price Wednesday a $108.49 million deal, consisting of $91.98 million of turnpike revenue refunding bonds (Aa3/AA-/AA-/), serials 2026-2038, and $16.51 million of special obligation bonds (A2/A+/A/), serials 2026-2034. BofA Securities.
Lake Havasu City, Arizona, (/AA/AAA/) is set to price Tuesday $102.915 million of senior lien wastewater system revenue GO refunding bonds, serials 2026-2043. Stifel.
The Board of Commissioners of the Port of New Orleans, Louisiana, (A2/A//) is set to price Tuesday $100 million facility revenue bonds, consisting of $18 million of non-AMT Series 2025A bonds, $50 million of AMT Series 2025B bonds, and $32 million of taxable Series 2025C bonds. J.P. Morgan.
The Agua Fria Union High School District No. 216, Arizona, (Aa1///) is set to price Thursday $100 million of school improvement bonds, projects of 2023 and 2024. Stifel.
Competitive
The Gwinnett County School District, Georgia, (Aaa/AAA//) is set to sell $332.67 million of GO refunding bonds at 11 a.m. Thursday.
