Municipals saw a mixed ending to March: the asset class was firmer after last week's selloff and issuance for the month rose, but munis are poised to end in the red, with the worst returns since March 2020.
Part of the month's poor performance came from munis' rout over the last two weeks.
The asset class extended its selloff last week as concerns regarding the tax-exempt status of munis continued to mount, combined with a heavy new-issue calendar and tax season selling by investors, said Jason Wong, vice president of municipals at AmeriVet Securities.
Muni yields rose by an average of 14 basis points across the curve last week, with yields rising the most in the belly of the curve, Wong said. Ten-year yields rose by 17.3 basis points to end the week at 3.25%.
"These circumstances have compounded to add even more pressure to an already volatile tax-exempt market," he noted.
With one trading day left in the month, muni market returns for March through Friday were at negative 2.02%, bringing year-to-date returns to negative 0.55%, according to Bloomberg data.
With the March selloff, munis continued to cheapen versus Treasuries last week. Ratios relative to Treasury securities are now "at the cheapest they have been since November 2023, with the five-year ratio passing 73%, the 10-year ratio passing 76%, and the 30-year ratio passing 93% for the first time in the same time frame," AmeriVet's Wong said.
The two-year municipal to UST ratio Monday was at 69%, the five-year at 72%, the 10-year at 77% 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 76% and the 30-year at 91% at 4 p.m.
Yet the negative news, with absolute yields and ratios climbing to new year-to-date highs, is starting to create "hopeful signs" for the muni market, said Birch Creek strategists.
March's volume was $41.385 billion in 685 issues, up 7.2% from $38.617 billion in 573 issues in 2024, according to LSEG data.
The influx of issuance shows no signs of slowing. This week, supply is estimated at $9.29 billion, led by
With this week's heavy new-issue calendar and BofA's recently revised forecast for record issuance this year, "we expect investors will begin legging back into the market as high-grade tax-free yields that are approaching 5% are likely too hard to pass up," Birch Creek strategists said.
Indeed, dealers last week reported "more accounts emerging from their hiding spots and dipping their toes back in the water. By the end of the week, the MMD curve saw its first positive performance, and dealers were able to pare down some inventory," they said.
In the primary market Monday, Jefferies held a one-day retail order for the
The second tranche, $249.605 million of Series 2025B refunding bonds, saw 5s of 1/2028 at 2.95%, 5s of 1/2030 at 3.13%, 5s of 7/2030 at 3.13%, 5s of 1/2035 at 3.54%, 5s of 7/2035 at 3.56% and 5s of 7/2037 at 3.73%, callable 7/1/2035.
AAA scales
MMD's scale was bumped four to seven basis points: The one-year was at 2.61% (-5) and 2.68% (-7) in two years. The five-year was at 2.86% (-7), the 10-year at 3.26% (-4) and the 30-year at 4.24% (-4) at 3 p.m.
The ICE AAA yield curve was bumped two to eight basis points: 2.67% (-6) in 2026 and 2.70% (-7) in 2027. The five-year was at 2.87% (-8), the 10-year was at 3.24% (-4) and the 30-year was at 4.25% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped four to five basis points: The one-year was at 2.61% (-5) in 2025 and 2.68% (-5) in 2026. The five-year was at 2.88% (-5), the 10-year was at 3.25% (-4) and the 30-year yield was at 4.23% (-4) at 4 p.m.
Bloomberg BVAL was bumped one to four basis points: 2.54% (-4) in 2025 and 2.64% (-4) in 2026. The five-year at 2.85% (-5), the 10-year at 3.19% (-5) and the 30-year at 4.21% (-4) at 4 p.m.
Treasuries were slightly firmer.
The two-year UST was yielding 3.899% (-1), the three-year was at 3.89% (-1), the five-year at 3.968% (-1), the 10-year at 4.229% (-2), the 20-year at 4.621% (-3) and the 30-year at 4.596% (-3) 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 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.
