Municipals were quiet Friday ahead of an $11 billion new-issue calendar as U.S. Treasury yields fell and equities ended up.
The bond market's attention has shifted from inflation and tariffs to economic growth issues, said BofA Global Research's Yingchen Li and Ian Rogow.
"Weak January retail sales and a weak preliminary February service PMI report are the two pieces of data that triggered the shift of the market psyche," they noted. "The bond market has clearly welcomed this change of heart."
Ten-year Treasury yields are 60 basis points off the January peak of 4.80%, and futures are pricing in two 25 basis point Fed rate cuts again, Li and Rogow noted.
"The muni market rallied somewhat less," they said, with the 10-year MMD AAA yield falling 38 basis points and the 30-year MMD AAA yield down 18 basis points from their mid-January peaks as of Friday.
It's unclear, they said, if concerns about growth will remain the focus.
"For munis, March is typically a transitory month," they added. "While we expect the market to work well during the first two weeks of the month, by late March, the market usually begins to trade on tax seasonality. This year, our estimated issuance in March exceeds redemptions and coupon payments. It appears to us that the recently cheapened muni ratios may last for the next couple of months."
The two-year municipal to UST ratio Friday was at 64%, the five-year at 65%, the 10-year at 68% and the 30-year at 87%, according to Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 62%, the five-year at 64%, the 10-year at 67% and the 30-year at 84% at 4 p.m.
Friday's data saw the Federal Reserve's preferred inflation gauge show core inflation on an annualized basis fell to a 2.6% gain, the smallest in about four years.
"The weak January spending figures likely mask continued decent underlying growth in personal consumption, though recent sour consumer sentiment surveys suggest concern about tariff-led inflation is starting to weigh," said BMO Senior Economist Sal Guatieri. "The chilly start to the year for consumers and potential trade war suggest downside risks for Q1 growth estimates."
After the PCE report, Payden & Rygel Chief Economist Jeffrey Cleveland said, "decent growth, slightly higher unemployment, and moderating inflation, suggests the Fed will resume cutting, perhaps sometime around mid-year, and probably cut more than the market expects over the next 12 months (three to four times)."
New-issue calendar
Issuance for next week rises to an estimated $11.041 billion, with $8.994 billion of negotiated deals and $2.047 billion of competitive deals on tap.
New York City leads the negotiated calendar with $1.4 billion of GOs, followed by the Regents of the University of California with $1.2 billion of general revenue bonds.
The competitive calendar is led by the California Department of Water Resources with $336 million of revenue bonds.
AAA scales
MMD's scale was unchanged: The one-year was at 2.54% and 2.54% in two years. The five-year was at 2.63%, the 10-year at 2.86% and the 30-year at 3.93% at 3 p.m.
The ICE AAA yield curve was bumped up to two basis points: 2.58% (-1) in 2026 and 2.54% (-1) in 2027. The five-year was at 2.62% (-1), the 10-year was at 2.85% (-2) and the 30-year was at 3.82% (-1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped a basis point: The one-year was at 2.59% (-1) in 2025 and 2.59% (-1) in 2026. The five-year was at 2.65% (-1), the 10-year was at 2.88% (-1) and the 30-year yield was at 3.84% (-1) at 4 p.m.
Bloomberg BVAL was unchanged: 2.48% in 2025 and 2.54% in 2026. The five-year at 2.62%, the 10-year at 2.86% and the 30-year at 3.86% at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 3.998% (-6), the three-year was at 3.982% (-5), the five-year at 4.027% (-5), the 10-year at 4.226% (-4), the 20-year at 4.547% (-2) and the 30-year at 4.511% (-2) near the close.
Primary to come
New York City (Aa2/AA/AA/AA+/) is set to price $1.407 billion of GOs on Wednesday, consisting of $500 million Series E bonds, serials 2026-2045, terms 2050 and 2055; and $906.82 million refunding Series F bonds, serials 2025-2043. Ramirez.
The Regents of the University of California (Aa2/AA/AA/) plans to price $1.208 billion general revenue bonds, consisting of $320.545 million of Series CB, serials 2029-2030, 2036-2040; and $887.005 million of Series CC, serials 2029-2045, terms 2052 and 2055. RBC Capital Markets.
The Kentucky State Property and Buildings Commission (Aa3/NR/AA-/NR/) plans to price Wednesday $829.83 million Project No. 132 revenue bonds, consisting of $700 million of Series 2025A bonds, serials 2026-2045; and $129.83 million of Series 2025B refunding bonds, serials 2027-2036. BofA Securities.
The Massachusetts Development Finance Agency plans to price $500 million of Series 2025A revenue bonds for Harvard University. Goldman Sachs.
Stanford University (Aaa/AAA/AAA/NR/) plans to price Wednesday $327 million of Series 2025 A taxable bonds. Morgan Stanley.
The Pennsylvania Housing Finance Agency (Aa1/AA+//) plans to price Wednesday $326.81 million single-family mortgage revenue bonds, consisting of $262.94 million Series 148A non-AMT social bonds, serials 2026-2037, terms 2040, 2045, 2050 and 2055; and $63.87 million of Series 148B taxable bonds, serials 2026-2037, terms 2040, 2045, 2050, 2054 and 2055. Wells Fargo.
The California Educational Facilities Authority (Aaa/AAA//) is set to price $319 million of Series V-4 revenue bonds for Stanford University. Goldman Sachs.
El Paso, Texas, (NR/AA/AA+/NR/) plans to price Tuesday $299.07 million of water and sewer revenue refunding bonds, serials 2026-2045, term 2050. Morgan Stanley.
The Orange County Local Transportation Authority, California, (NR/AAA/AA+/NR/) plans to price Wednesday $232.98 million of Measure M2 sales tax revenue refunding bonds, serials 2026-2041. BofA Securities.
The New Hope Cultural Education Facilities Finance Corp. plans to price Wednesday $231.585 million of non-rated retirement facility revenue refunding bonds (Bella Vida Forefront Living project). Ziegler.
The New York State Housing Finance Agency (Aaa///) plans to price $231 million 160 West 62nd Street housing revenue bonds, consisting of $155 million of Series A1 and $76 million of Series A2. Wells Fargo.
The Houston Independent School District (Aaa/AAA//) plans to price Thursday $186.155 million of PSF-insured limited tax refunding bonds, Series 2025B, serial 2026. RBC Capital Markets.
Forest Hills Public Schools, Michigan, (Aa2///) plans to price Tuesday $173.35 million of 2025 school building and site bonds, Series I, serials 2026-2045. Stifel.
The Virginia Housing Development Authority (Aa1/AA+//) plans to price Tuesday $172.52 million of non-AMT rental housing bonds, Series 2025A, serials 2027-2037, terms 2040, 2045, 2050, 2055, 2060, 2068. Raymond James.
The School Board of Manatee County, Florida, (/A+/A+/) plans to price Tuesday $139.255 million Florida master lease program certificates of participation, Series 2025A, serials 2026-2045. BofA Securities.
The Nevada Housing Corp. (NR/AA+/NR/NR/) plans to price Wednesday $138 million of senior single-family mortgage revenue bonds, consisting of $30 million of non-AMT Series 2025A bonds and $108 million of taxable Series 2025B. J.P. Morgan.
The Arizona Industrial Development Authority plans to price Tuesday $134.96 million of senior living revenue bonds, consisting of $199.11 million of Series A, $3.35 million of Series B and $12.5 million of Series C. H.J. Sims.
The Racine Unified School District, Wisconsin, (Aa3///) plans to price Tuesday $130.82 million GO promissory notes, serials 2026-2030, 2032-2045. Baird.
The Board of Trustees for Mesa University, Colorado, (Aa2/NR/NR/NR/) plans to price Tuesday $117.545 million of institutional enterprise revenue and refunding bonds, Series 2025A, serials 2025-2045, terms 2050, 2055. Jefferies.
The Adams County School District 14, Colorado, (Aa2/AA//) plans to price Tuesday $113.9 million GOs, serials 2025, 2032-2044. RBC Capital Markets.
Marion, Illinois, plans to price Tuesday $112.44 million of sales tax revenue bonds (STAR bonds District Project Area No. 1), terms 2045, 2055. Stifel.
The California Public Finance Authority plans to price $102.12 million senior living revenue bonds, consisting of $96.775 million of Series A, $2.345 million of Series B and $3 million of Series C. HJ Sims.
Competitive
The California Department of Water Resources (Aa1/AAA//) will take bids on $336 million of Central Valley Project Water System revenue bonds at 11:30 a.m., Eastern, Tuesday.
Wisconsin will bring $253.905 million of GOs, Series A, on Wednesday at 10:45 a.m.
Mobile, Alabama, (Aa2/AA//) will bring $226.485 million GO warrants, Series 2025A, on Wednesday at 10 a.m.
Cambridge, Massachusetts, (Aaa/AAA/AAA/) will bring $166 million of GO municipal purpose loan of 2025 on Wednesday at 11 a.m.
Clark County, Nevada, (Aa1/AAA//) will auction $126 million of limited tax GO flood control refunding bonds at 11:15 a.m. Tuesday.
Johnston County, North Carolina, (Aaa/AAA//) will auction $100 million general obligation bonds at 11 a.m. Tuesday.
Gary Siegel contributed to this report.
