Municipals were slightly firmer Tuesday in the secondary market as the primary market took focus due to a robust new-issue calendar, led by $1.75 billion of taxable general obligation bonds from New York City. U.S. Treasury yields fell and equities ended down.
The two-year ratio Tuesday was at 80%, the five-year at 81%, the 10-year at 81% and the 30-year at 95%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 78%, the five-year at 78%, the 10-year at 79% and the 30-year at 93% at 4 p.m.
Last week saw a liquidity crisis, said John Flahive, head of fixed income at BNY Wealth.
It was "perfect storm" for the muni market because of the heavy new-issue calendar and tax season, he said, along with money managers looking to "drive liquidity" from one asset class, such as bonds, to go in the others, like equities, exasperated the problem.
Part of the problem was also
"As technicals weakened, so did liquidity, particularly for small position sizes," he noted.
However, the market saw two-way flow last week for larger, institutional-size blocks, but at adjusted levels, compared to the COVID liquidity crunch, where "it was a one-way flow — everyone selling but no one willing to buy," Clements said.
"The overhang of the administration eliminating or curtailing the municipal tax exemption" also weighed on the market, he said.
"You have all these pressures that came to a point last week," Flahive said.
However, this week the swings in munis have been less volatile, with yields only bumped six to 12 basis points, depending on the scale, Monday and up to four basis points, depending on the scale, on Tuesday.
And if the muni market "stays here at these new relationships, we'll find its footing, because we still have to get through a lot of the supply, much of which was postponed last week," so there's still a decent amount of issuance ahead, Flahive said.
"As long as the equity markets are relatively stable and the Treasury market is relatively stable, the municipal bonds in the primary market that are priced appropriately will do pretty well, because we've had such a material adjustment on a nominal and relative basis that you'd like to think that we'd come back and have at least a more sound footing," he said.
However, "we [still] might find ourselves again in this psychotic municipal market of you can't sell enough, you can't buy enough," he said, noting this was not seen last week but the week before, such as with the
"Price talk" on Monday versus where it ended up coming was as much as 25 to 30 basis points lower, then rallying 20 basis points before selling off 60 basis points, according to Flahive.
"It's been a while since you've seen markets like that," he said.
Furthermore, clouds of uncertainty still hang over the bond market, Flahive notes.
"We don't know how inflationary the tariffs will be. We don't know whether the tug and pull of the tariff inflation or a weakening economy? Which one's going to be the dominant theme? We don't know whether foreign participants will continue to support our auctions," he said.
In the primary market Tuesday, RBC Capital Markets priced for
J.P. Morgan priced for the Dormitory Authority of the State of New York (Aa3/AA-/AA/) $471.56 million of revenue bonds on behalf of the Memorial Sloan Kettering Cancer Center. The first tranche, $215 million of Series S1 saw 5s of 7/2035 at 2.93% and 5.25s of 2054 at 4.80%, callable 7/1/2035.
The second tranche, $111.56 million of Series 2-A, saw 5s of 7/2048 with a mandatory tender of 7/1/2032 at 3.89%, callable 7/1/2032.
The third tranche, $145 million of Series 2-B, saw 5s of 7/2049 with a mandatory tender of 7/2/2029 at 3.70%, callable 7/2/2029.
RBC Capital Markets priced for the Houston Independent School District, Texas, (Aaa/AAA//) $264.935 million of PSF-insured limited tax refunding bonds, Series 2025B, with 5s of 2/2026 at 3.29% and 5s of 2029 at 3.38%, noncall.
In the competitive market, Anne Arundel County, Maryland, (Aaa/AAA/AAA/) sold $419.135 million in four tranches, all to BofA Securities.
The county sold $183.34 million of consolidated general improvement bonds, with 5s of 10/2025 at 3.10%, 5s of 2030 at 3.26%, 5s of 2035 at 3.58%, 5s of 2040 at 3.95%, 5s of 2045 at 4.37%, 5s of 2050 at 4.57% and 5s of 2054 at 4.63%, callable 4/1/2035.
Additionally, the county sold $84.205 million of consolidated water and sewer bonds, with 5s of 10/2025 at 3.10%, 5s of 2030 at 3.26%, 5s of 2035 at 3.58%, 5s of 2040 at 3.96%, 5s of 2045 at 4.40%, 5s of 2050 at 4.57% and 5s of 2054 at 4.63%, callable 4/1/2035.
Anne Arundel County sold $84.785 million of consolidated general improvement refunding bonds, with 5s of 4/2026 at 3.07%, 5s of 2030 at 3.23% and 5s of 2035 at 3.54%, noncall.
Lastly, the county sold $66.805 million of consolidated water and sewer refunding bonds, with 5s of 4/2026 at 3.07%, 5s of 2030 at 3.23%, 5s of 2035 at 3.54%, 5s of 2040 at 3.95% and 5s of 2045 at 4.37%, callable 4/1/2035.
North Carolina (Aa1/AA+//) sold $300 million of Build NC limited obligation bonds, Series 2025A, to BofA Securities, with 5s of 5/2026 at 3.09%, 5s of 2030 at 3.25%, 5s of 2035 at 3.59% and 4s of 2040 at 4.21%, callable 5/1/2035.
AAA scales
MMD's scale was bumped three to four basis points: The one-year was at 3.06% (-3) and 3.08% (-3) in two years. The five-year was at 3.21% (-4), the 10-year at 3.52% (-4) and the 30-year at 4.51% (-3) at 3 p.m.
The ICE AAA yield curve was bumped up to four basis points: 3.05% (unch) in 2026 and 3.04% (-4) in 2027. The five-year was at 3.15% (-3), the 10-year was at 3.46% (-3) and the 30-year was at 4.48% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped two to three basis points: The one-year was at 3.04% (-2) in 2025 and 3.05% (-2) in 2026. The five-year was at 3.22% (-3), the 10-year was at 3.52% (-2) and the 30-year yield was at 4.50% (-3) at 4 p.m.
Bloomberg BVAL was bumped two to three basis points: 2.88% (-2) in 2025 and 2.95% (-2) in 2026. The five-year at 3.12% (-3), the 10-year at 3.44% (-3) and the 30-year at 4.48% (-3) at 4 p.m.
Treasuries saw small gains.
The two-year UST was yielding 3.845% (flat), the three-year was at 3.849% (-2), the five-year at 3.976% (-4), the 10-year at 4.332% (-4), the 20-year at 4.817% (-3) and the 30-year at 4.779% (-3) near the close.
Primary to come
The Los Angeles Department of Airports (Aa3//AA-/) is set to price Wednesday $1.477 billion on behalf of the Los Angeles International Airport, with $928.48 million of green governmental purpose/non-AMT subordinate revenue and refunding revenue bonds, 2025 Series D, serials 2027-2045, terms 2048, 2051; $476.135 million of governmental purpose/non-AMT subordinate revenue and refunding revenue bonds, 2025 Series E, serials 2026-2045, terms 2050, 2055; and $72.765 million of private activity/AMT subordinate refunding revenue bonds, 2025 Series F, serials 2026-2030, 2033-2035. Ramirez.
The Jersey City Municipal Utilities Authority is set to price Wednesday $252.225 million of BAM-insured and non-BAM-insured obligations, Series 2025. Stifel.
The Rio Hondo Community College District, California, (Aa2///) is set to price Wednesday $201.14 million of dedicated unlimited ad valorem property tax Election of 2024 GOs, Series A, serials 2026-2027, 2036-2045, terms 2050, 2055. Cabrera Capital Markets.
The Western Michigan University Board of Trustees (Aa3/A//) is set to price Wednesday $159.44 million of general revenue refunding bonds, Series 2025A, serials 2025-2045, terms 2049, 2054. Barclays.
The Phoenix Union High School District No. 210, Arizona, (Aa1/AA/AAA/) is set to price Wednesday $151.235 million of Project of 2023 school improvement bonds, Series B, serials 2025-2032.Stifel.
