Municipals were little changed Friday ahead of another week of healthy issuance. U.S. Treasuries were weaker and equities ended down.
Tax-exempts, aided by rallying USTs, are "enjoying a relatively strong start" to the second half, said Barclays strategists Mikhail Foux and Clare Pickering.
Investment-grade and high-yield returns "have been remarkably similar, though — on the order of 0.7%-0.8% MTD, with only the single-A portion of the market slightly underperforming," they said.
Following the high-yield market's "very strong performance" in the first half, it does not have that much of an upside, and like the investment-grade market, its performance will likely be driven by carry, Barclays strategists said.
"Hence, it is not surprising that IG and HY returns have been remarkably similar in July, and we expect that trend to largely continue," they said.
Despite
The two-year muni-to-Treasury ratio Friday was at 63%, the three-year at 65%, the five-year at 67%, the 10-year at 66% and the 30-year at 82%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 64%, the three-year at 66%, the five-year at 67%, the 10-year at 67% and the 30-year at 83% at 3:30 p.m.
MMD-UST ratios have already widened 2-3 percentage points in July, nearing levels expected to be reached by the end of the year, Barclays strategists said.
High-grade spreads, which are already tight, may "tighten a bit more, mostly in the single-A and BBB-rating buckets," they said.
Meanwhile, taxable spreads continue to "move sideways," slightly underperforming corporates, Barclays strategists noted.
Non-Build America Bond taxable spreads remain "tight," while most BABs are "trading at, or slightly wider than, their [extraordinary redemption provision] strikes, they said
"In our view, nothing will change for this market segment in the near term, as more issuers have continued to call their BABs," Barclays strategists noted.
In 2024, there have been 35 "unique" issuers that have either called BABs, posted conditional calls or announced financing considerations, totaling $17.9 billion for the year, according to J.P. Morgan.
BABs trading at or wider than their extraordinary redemption provision strikes "remain quite attractive, as in the worst case, investors will be taken out of their bonds without any losses," Barclays strategists said.
However, not all BABs will be refunded, and "for the time being, these bonds will not provide much better carry for investors," they said. "Even though there is limited upside, their carry might prove attractive in a low taxable spread environment," they said.
New-issue calendar is at $9.7B
The new-issue calendar is at $9.673 billion the week of July 22, with $8.3 billion of negotiated deals expected to come to market and $1.372 billion of competitive deals on tap.
The negotiated calendar is led by the Texas Transportation Commission with $1.7 billion of first-tier and second-tier revenue refunding bonds, followed by the South Carolina Public Service Authority with $900 million of revenue obligations.
Connecticut leads the competitive calendar with $223 million of GO refunding bonds.
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 2.88% and 2.86% in two years. The five-year was at 2.77%, the 10-year at 2.78% and the 30-year at 3.66% at 3 p.m.
The ICE AAA yield curve was cut up to two basis points: 2.89% (unch) in 2025 and 2.88% (unch) in 2026. The five-year was at 2.77% (+2), the 10-year was at 2.80% (unch) and the 30-year was at 3.64% (+1) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.95% in 2025 and 2.92% in 2026. The five-year was at 2.78%, the 10-year was at 2.78% and the 30-year yield was at 3.63% at 3 p.m.
Bloomberg BVAL was cut up to one basis point: 2.94% (unch) in 2025 and 2.89% (unch) in 2026. The five-year at 2.80% (unch), the 10-year at 2.79% (+1) and the 30-year at 3.67% (unch) at 3:30 p.m.
Treasuries were weaker.
The two-year UST was yielding 4.508% (+4), the three-year was at 4.283% (+4), the five-year at 4.166% (+5), the 10-year at 4.240% (+4), the 20-year at 4.556% (+4) and the 30-year at 4.451% (+3) at 3:30 p.m.
Primary to come
The Texas Transportation Commission is set to price Tuesday $1.44 billion of Central Texas Turnpike System revenue refunding bonds, consisting of $406.024 million of first-tier bonds, Series 2024-A ((A2/A/A+/), serials 2032, 2035-2038; and $1.034 billion of second-tier bonds, Series 24-C (A3/A-/A-/), serials 2027, 2030-2042. Wells Fargo.
The commission (A2/A/A+/) is also set to price Tuesday $225 million of Central Texas Turnpike System first-tier revenue refunding put bonds, Series 2024B. Morgan Stanley.
The South Carolina Public Service Authority (A3/A-/A-/) is set to price Tuesday $900 million of revenue obligation bonds, consisting of $180 million of tax-exempt improvement bonds, Series 2024 A; $670 million of tax-exempt refunding bonds, Series 2024B; and $50 million of taxable improvement bonds, Series 2024C. J.P. Morgan.
The Minneapolis-St. Paul Metropolitan Airports Commission (/A+/A+/) is set to price Wednesday $693.80 million of subordinate airport revenue bonds, consisting of $208.23 million of governmental/non-AMT bonds, Series 2024A, term 2054; and $485.66 million of private activity/AMT bonds, serials 2026-2044, term 2049. Wells Fargo.
The Black Belt Energy Gas District is set to price $600 million of gas project revenue bonds, 2024 Series C. Goldman Sachs.
The Pennsylvania Housing Finance Agency (Aa1/AA+//) is set to price Wednesday $491.115 million of single-family mortgage revenue bonds, consisting of $339.3 million on non-AMT social bonds, Series 2024-146A, serials 2034-2036, terms 2039, 2044, 2049, 2053, 2054; $75.69 million of taxables, Series 2024-146B, serials 2025-2034, terms 2039,2043; and $80.125 million of taxales, Series 2024-146C, serials 2025-2034, terms 2039, 2044, 2049, 2053, 2054 BofA Securities.
King County, Washington, (Aa1/AA+//) is set to price Wednesday $300 million of sewer revenue refunding bonds, 2024 Series A. BofA Securities.
The San Diego Public Facilities Financing Authority (/AA/AA/) is set to price Tuesday $270.69 million of subordinated sewer revenue bonds, Series 2024A, serials 2025-2044, terms 2049, 2054. Siebert Williams Shank.
The National Finance Authority, New Hampshire, (A2///) is set to price Wednesday $266.112 million of social municipal certificates, Series 2024-3, Class A, serial 2041. Wells Fargo.
The Hampton Roads Sanitation District, Virginia, (Aa1/AA+//) is set to price Tuesday $244.635 million of wastewater revenue bonds, Series 2024B, serials 2039-2049, term 2054. BofA Securities.
The Longview Independent School District, Texas, (Aaa//AAA/) is set to price $200 million of PSF-insured unlimited tax school building bonds, Series 2024, serials 2025-2049. Oppenheimer.
Galveston, Texas, (/A/A-/) is set to price Thursday $160 million of Wharves and Terminal first lien revenue bonds, consisting of $111.525 million of Series 2024A, and $48.475 million of Series 2024B. Piper Sandler & Co.
The Utah Housing Corp. (Aa2///) is set to price Tuesday $147.5 million of taxable single-family mortgage bonds, 2024 Series H. Jefferies.
The South Carolina Jobs Economic Development Authority (/AA/AA-/) is set to price Thursday $141.13 million of McLeod Health Project healthcare revenue refunding bonds, Series 2024. J.P. Morgan.
The State of New York Mortgage Agency (Aa1///) is set to price Wednesday $140 million of social homeowner mortgage revenue bonds, consisting of $89.975 million of non-AMT bonds, Series 261, terms 2039, 2044, 2049, 2054; $30.025 million of AMT bonds, Series 262, serials 2025-2036; and $20 million of taxables, Series 263, term 2054. Ramirez.
The Elgin Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $139.565 million of PSF-insured unlimited tax school building bonds, Series 2024, Piper Sandler.
Lakeland, Florida, (A2///) is set to price Wednesday $138.14 million of fixed-mode Lakeland Regional Health System hospital revenue refunding bonds, Series 2024.J.P. Morgan.
The Oklahoma Water Resources Board (/AAA/AAA/) is set to price Tuesday $130 million of Clean Water Program Revolving Fund revenue bonds, Series 2024, serials 2026-2049.
The Michigan Finance Authority is set to price Tuesday $127.23 million of state aid revenue notes, consisting of $62.31 million of Series 24A-1, and $64.92 million of Series 24A-2. J.P. Morgan.
The Wisconsin Public Finance Authority (Aa3///) is set to price Thursday $120 million of tax-exempt pooled securities, Series 2024-2, Class A certificates. J.P. Morgan.
Competitive
Connecticut (Aa3/AA-/AA-) is set to sell $223.365 million of GO refunding bonds, Series 2024 E, at 11 a.m. Eastern Tuesday.
The Virginia Residential Authority (Aa1/AA/) is set to sell $53.84 million of state moral obligation revenue bonds for the Virginia Pooled Financing Program, Series 2024B, at 10:45 a.m. eastern Tuesday, and $122.230 million of infrastructure revenue bonds for the Virginia Pooled Financing Program, Series 2024B, at 10:15 a.m. Eastern Tuesday.
Orangeburg, South Carolina, is set to sell $155 million of GO bond anticipation notes, Series 2024, at 11 a.m. Eastern Tuesday.
Richmond, Virginia, is set to sell $124.43 million of GO public improvement bonds, Series 2024C, at 10:30 a.m. Eastern Wednesday.
Layla Kennington contributed to this story.
