Municipals were little changed to close out a busy week in both the primary and secondary, while U.S. Treasury yields fell out long and equities rallied.
"Although this round of muni market bullish reversal was pulled off one week later than Treasuries', the rally progressed better," said BofA strategists.
The 10-year UST reached its peak on Oct. 19 and declined 35 basis points by Friday's close. Meanwhile, the 10-year AAA muni reached its peak on Oct. 31, and by Friday's close had fallen 41 basis points, pushing muni-UST ratios lower.
The two-year muni-to-Treasury ratio Friday was at 65%, the three-year at 66%, the five-year at 67%, the 10-year at 69% and the 30-year at 89%, according to Refinitiv Municipal Market Data's 3 p.m., ET, read. ICE Data Services had the two-year at 66%, the three-year at 66%, the five-year at 66%, the 10-year at 69% and the 30-year at 88% at 3 p.m.
"This round of a bond market rally appears to be about the unwinding of the selloff that ran from August to late October which was propelled by a surprising economic acceleration in 3Q, marked by large retail sales and industrial production, on top of high employment and sticky inflation," BofA strategists said.
They noted that "investors should watch the economic data stream over the next several weeks to see if the weaker-than-expected October employment report marks the start of some economic deceleration."
But "as with most fast rallies there are sessions when the market pauses to assess where fair value should play out," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.
"A combination of five sessions in which muni yields had rallied 30-40 basis points and USTs sold off on a weak 30-year auction brought a quieter day for rates," she said.
Rate volatility has been pronounced over the past 10 sessions from Oct. 30 through Friday, according to Olsan.
The 10-year AAA Refinitiv MMD range is 3.20%-3.61%, while the 10-year UST is 4.512%-4.887%. The 30-year AAA Refinitiv MMD is 4.20%-4.57%, while the 30-year UST is 4.638%-5.043%.
Thursday's poor Treasury performance "should put a bit of a damper on the municipal outlook," said Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel.
On the plus side, they noted said "supply remains "manageable, with the 30-day visible pipeline well below average, and we will likely have just a handful of active supply weeks left this year."
Bond Buyer 30-day visible supply sits just above $11 billion, while issuance for the coming week is at about $8 billion.
The largest deals of the week are the New Jersey Transportation Trust Fund Authority (A2/A-/A/A/) with $1.25 billion of transportation program bonds and the District of Columbia (Aa1/AAA/AA+/) with $1.216 billion of taxable and tax-exempt income tax-secured revenue and refunding bonds, along with a tax-exempt forward delivery tranche.
While outflows from muni mutual funds continued, albeit at a much slower pace, Barclays strategists said they do not consider them to be a "major headwind" at the moment.
Despite the rate volatility, Barclays strategists still "see value in high-quality municipals, which have finally started outperforming other market segments, and the spread differential between high- and lower-rated munis has finally begun decompressing."
Secondary trading
LA DWP 5s of 2024 at 3.19%-3.35% versus 3.44% Thursday. Florida BOE 5s of 2024 at 3.49%. NYC 5s of 2025 at 3.41%.
California 5s of 2028 at 3.15% versus 3.19% original on Wednesday. DASNY 5s of 2029 at 3.22%. Montgomery County, Maryland, 5s of 2029 at 3.18%.
Delaware 5s of 2033 at 3.19% versus 3.48% on 11/2 and 3.53% on 11/1. Triborough Bridge and Tunnel Authority 5s of 2033 at 3.34%-3.31%. NYC TFA 5s of 2036 at 3.68% versus 4.12% on 11/1 and 4.18% on 10/30.
NYC TFA 5s of 2048 at 4.52%-4.49% versus 4.39% Thursday and 4.64% Tuesday. Massachusetts 5s of 2048 at 4.44%-4.43% versus 4.51%-4.23% Tuesday and 4.59% Monday.
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 3.42% and 3.29% in two years. The five-year was at 3.12%, the 10-year at 3.20% and the 30-year at 4.22% at 3 p.m.
The ICE AAA yield curve was mixed: 3.38% (-1) in 2024 and 3.32% (-2) in 2025. The five-year was at 3.11% (-1), the 10-year was at 3.21% (unch) and the 30-year was at 4.19% (+1) at 3 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 3.43% in 2024 and 3.30% in 2025. The five-year was at 3.15%, the 10-year was at 3.21% and the 30-year yield was at 4.21%, according to a 3 p.m. read.
Bloomberg BVAL was unchanged: 3.46% in 2024 and 3.39% in 2025. The five-year at 3.17%, the 10-year at 3.25% and the 30-year at 4.22% at 3 p.m.
Treasuries were firmer out long.
The two-year UST was yielding 5.046% (+1), the three-year was at 4.813% (+1), the five-year at 4.653% (flat), the 10-year at 4.621% (-1), the 20-year at 4.942% (-3) and the 30-year Treasury was yielding 4.731% (-4) at 3:15 p.m.
Primary to come
The New Jersey Transportation Trust Fund Authority (A2/A-/A/A/) is set to price Thursday $1.25 billion of transportation program bonds, Series BB, serials 2032-2050. Wells Fargo Bank.
The District of Columbia (Aa1/AAA/AA+/) is set to price $1.216 billion of income tax-secured revenue bonds, consisting of $482.230 million of tax-exempt bonds, Series 2023A, serials 2037-2043, term 2048; $227.360 million of taxable refunding bonds, Series 2023B, series 2025-2037; $186.68 million of tax-exempt refunding bonds, Series 2023C, serials 2024, 2031-2033; and $320.145 million of tax-exempt forward delivery refunding bonds, Series 2024A, serials 2025-2039. Citigroup Global Markets Inc.
The Indianapolis Local Public Improvement Bond Bank is set to price Wednesday $436.83 million of Convention Center Hotel revenue bonds, consisting of $184.625 million of Series 2023E senior bonds (/BBB-//); $52.205 million of Series 2023F-1 subordinate bonds (nonrated); and $200 million of BAM-insured Series 2023F-2 subordinate bonds. Piper Sandler & Co.
The Indianapolis Local Public Improvement Bond Bank (Aaa//AAA/) is also set to price Thursday $155 million of ad valorem property tax-funded project revenue bonds. BofA Securities.
The Louisiana Public Facilities Authority (Aaa///) is set to price Monday $204.215 million of tax-exempt solid waste disposal facility revenue bonds (Elementus Minerals, LLC Project). Piper Sandler & Co.
The Municipal Improvement Corp. of Los Angeles (Aa3//AA-/) is set to price Thursday $193.92 million of lease revenue bonds, Series 2023-A, serials 2024-2043. RBC Capital Markets.
The Massachusetts Housing Finance Agency (Aa2/AA+//) is set to price Thursday $177.46 million of non-AMT sustainability bonds, consisting of $50.505 million of Series C-1 bonds, serials 2026-2035, terms 2038, 2043, 2048, 2053, 2058, 2063 and 2066; $124.755 million of Series C-2 bonds, serials 2027-2028; and $2.2 million of Series D bonds, serial 2024. BofA Securities.
The Virginia Housing Development Authority (Aa1/AA+//) is set to price Tuesday $167.855 million of non-AMT rental housing bonds, 2023 Series F, serials 2026-2035, terms 2038, 2043, 2048, 2053, 2058, 2063, 2067. Raymond James & Associates.
The San Diego Unified School District is set to price Tuesday $145.515 million consisting of $2.99 million of Series N-1 taxable green GOs (Aa2///), $97.01 million of Series N-2 green GOs (Aa2//AAA/AAA), $3.255 million of Series R-6 GO refunding bonds (Aa2//AAA/AAA) and $45.26 of Series SR-3A refunding bonds (Aa2//AAA/AAA). Jefferies.
The South Dakota Housing Development Authority (Aaa/AAA//) is set to price Wednesday $145 million of homeownership mortgage bonds, consisting of $105 million of non-AMT Series 2023G bonds, serials 2024-2035, terms 2038, 2043, 2049, 2055; and $40 million of taxable Series 2023H bonds, serials 2024-2033, terms 2038, 2040, 2054. Wells Fargo Bank.
The Maine Health & Higher Educational Facilities Authority (/AA//) is set to price Wednesday $124.72 million of revenue refunding bonds, Series 2023B, insured by Assured Guaranty Municipal Corp. Morgan Stanley.
The New York City Housing Development Corp. (Aa2/AA+//) is set to price Wednesday $121.5 million of term rate sustainable development multi-family housing revenue bonds, 2023 Series D, serial 2063. Citigroup Global Markets.
Ohio (Aa1//AAA/AAA) is set to price Tuesday $121.18 million of GO highway capital improvement bonds, Series Y, serials 2025-2039. Loop Capital Markets.
The Missouri Housing Development Commission (/AA+//) is set to price Wednesday $120 million of non-AMT single-family mortgage revenue bonds (First Place Homeownership Loan Program), Series 2023 E, serials 2024-2035, terms 2038, 2043, 2048, 2053, 2054. Stifel, Nicolaus & Co.
The Successor Agency to the Redevelopment Agency Community Facilities District No. 6, City and County of San Francisco, (/AA//) is set to price Tuesday $119.86 million of Mission Bay South Public Improvements special tax refunding bonds, Series 2023, serials 2024-2043, insured by Assured Guaranty Municipal Corp. Stifel, Nicolaus & Co.
The Rome Building Authority, Georgia, (Aa1/AA+//) is set to price Monday $102 million of revenue bonds (Rome City Schools Project), Series 2023, serials 2025-2044, insured by Georgia State Aid Intercept Program. Raymond James & Associates, Inc.
Cape Coral, Florida, (A1//A+/) is set to price Wednesday $100 million of water and sewer revenue bonds, Series 2023. Morgan Stanley.
Competitive
The Missouri Highways and Transportation Commission (Aa1/AA+/AA+/) is set to sell $381.610 million of State Appropriations Mega Projects state road bonds, Series A 2023, at 11 a.m. eastern Tuesday.
