Municipals were slightly firmer Wednesday as market volatility seen last week continues to abate. U.S. Treasury yields fell and equities sold off.
The two-year ratio Wednesday was at 80%, the five-year at 81%, the 10-year at 82% 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 78% and the 30-year at 93% at 4 p.m.
The Investment Company Institute reported larger outflows for the week ending April 9 of $3.714 billion, following $1.15 billion of outflows the previous week.
Exchange-traded funds saw outflows of $1.402 billion after $944 million of inflows the week prior, per ICI data.
If three days make a trend, then munis will have "put the earlier part of the month in the rearview mirror," said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.
Three straight sessions with price gains come after a steadier UST tone in recent days, she noted.
"Municipal activity suggests a pool of bidders is stepping in to take advantage of yield dislocations," Olsan noted.
Competitive sales of Aa1/AA-plus North Carolina limited obligation and AAA-rated Anne Arundel County, Maryland, general obligation bonds drew firm levels, as both deals saw "short and intermediate yields at parity or just within a few basis points of AAA reference spots — unlike the prior week's issues which resulted in 20 basis point and wider concessions, she said.
Upcoming issuance will "feel encouraged" as multiple credits are set to price, including mega deals from Connecticut and Massachusetts, both above $1 billion, Olsan said.
The 30-day Bond Buyer visible supply is at $18.62 billion.
"Amidst heightened volatility, secondary flows remain elevated," she said, noting this month's average daily par value traded is $12 billion, up from last year's $10 billion level.
However, there seems to be "no outsized changes to quality breakdowns (AA-rated bonds are capturing about 55% of all trades and single-A/BBB credits carry less than 15%)," Olsan said.
"Inter-dealer volume has subsided to below 30% in all tenors — signs that more dealer-to-customer business is taking place," she said.
Even if the market has "found its footing," the challenge of distribution of upcoming supply remains, she said.
A higher yield set and more favorable relative value ratios, she said, will be a draw for many investors.
All major ranges have receded from the first week of April's highs, but significant value is being held, according to Olsan.
In the lead-up to the April 15 tax day, she said, "ultra-short yields became exaggerated as money fund redemptions were made."
"Daily and weekly floater rates surged above 4.50% and the one-year AAA MMD yield traded to an annual high of 3.45% (more than 100 basis points above the year's average)," she said.
The current one-year rate is holding above 3.00%, "a relevant bogey in that it generates a tax equivalent yield of 5.00% for top-bracket buyers," Olsan said.
Credits such as New Jersey GO due in 2026 are trading around 3.15%, she noted.
In the five-year range, yields are around 3.25%, or about 100 basis points from last year's lows, Olsan said.
The five-year muni-UST ratio has risen to around 80% from the 58% bottom from exactly a year ago, she said.
The active 10-year area has rallied more than 35 basis points from the 3.89% high of early April, with the 10-year AAA MMD yield settling around 3.50%, Olsan said.
TEYs have risen from the low 4.00% range to near 6.00%, she said.
"Trades such as Wisconsin GO 5s due 2036 (call 2034) at 3.69% came at a more than a 60 basis point discount to the issue's original yield from early March," Olsan said.
Additionally, buyers are receiving relative values in the 80% range, well higher than the mid-50% levels at certain periods over the past year, she said.
"High grades at the far end of the curve have corrected about 110 basis points off the low range near 3.50%," she said.
Because of the variety of coupons available, Olsan noted, generic yields and ratios can be "enhanced."
"Sub-5% structures carry yields over 4.75% (Texas Water 4.25s due 2051 are trading above 4.80%) with respective ratios over 100% to USTs," she said.
CUSIP requests fall
The aggregate total of identifier requests for new municipal securities in March — including municipal bonds, long-term and short-term notes, and commercial paper — fell 1.1% from February totals. On a year-over-year basis, overall municipal volumes were up 11.4% through the end of March.
Texas led state-level municipal request volume with a total of 106 new CUSIP requests in February, followed by California with 104 and New York with 81.
For municipal bond identifier requests specifically, there was no change from last month, and municipal, and requests are still up 14.1% year-over-year.
AAA scales
MMD's scale was bumped two to three basis points: The one-year was at 3.03% (-3) and 3.05% (-3) in two years. The five-year was at 3.18% (-3), the 10-year at 3.49% (-3) and the 30-year at 4.49% (-2) at 3 p.m.
The ICE AAA yield curve was bumped two to four basis points: 3.04% (-2) in 2026 and 3.01% (-3) in 2027. The five-year was at 3.11% (-4), the 10-year was at 3.42% (-4) and the 30-year was at 4.45% (-3) at 4 p.m.
The S&P Global Market Intelligence municipal curve saw small bumps: The one-year was at 3.02% (-2) in 2025 and 3.04% (-1) in 2026. The five-year was at 3.19% (-3), the 10-year was at 3.50% (-2) and the 30-year yield was at 4.48% (-2) at 4 p.m.
Bloomberg BVAL was bumped three basis points: 2.85% (-3) in 2025 and 2.92% (-3) in 2026. The five-year at 3.09% (-3), the 10-year at 3.41% (-3) and the 30-year at 4.45% (-3) at 4 p.m.
Treasuries saw gains.
The two-year UST was yielding 3.775% (-7), the three-year was at 3.776% (-8), the five-year at 3.904% (-8), the 10-year at 4.278% (-6), the 20-year at 4.783% (-4) and the 30-year at 4.746% (-3) near the close.
Primary on Tuesday
Ramirez priced for the Los Angeles Department of Airports (Aa3//AA-/) $1.331 billion on behalf of the Los Angeles International Airport. The first tranche, $971.325 million of green governmental purpose/non-AMT subordinate revenue and refunding revenue bonds, 2025 Series D, saw 5s of 5/2027 at 3.15%, 5s of 2030 at 3.27%, 5s of 2035 at 3.60%, 5s of 2040 at 4.04%, 5s of 2045 at 4.49% and 5.25s of 2051 at 4.62%, callable 5/15/2035.
The second tranche, $285.085 million of governmental purpose/non-AMT subordinate revenue and refunding revenue bonds, 2025 Series E, saw 5s of 5/2026 at 3.14%, 5s of 2030 at 3.27%, 5s of 2035 at 3.60%, 5s of 2040 at 4.04%, 5s of 2045 at 4.49%, 5s of 2050 at 4.65% and 5.25s of 2055 at 4.67%, callable 5/15/2035.
The third tranche, $74.8 million of private activity/AMT subordinate refunding revenue bonds, 2025 Series F, saw 5s of 5/2026 at 3.84%, 5s of 2030 at 4.10% and 5s of 2035 at 4.40%, noncall.
