Municipals sold off again Friday, as yields saw significant cuts for the fourth time this week. Tariff-induced volatility continues to challenge the market and may play a role in whether deals can get done next week.
U.S. Treasuries were weaker 10 years and in and equities ended up.
High-grade munis and USTs "whipsawed this week amid pronounced volatility over trade policy actions," said J.P. Morgan strategists led by Peter DeGroot.
"The current market sell-off is the result of forced selling given the confluence of this week's around 45bps jump in 10yr UST rates,
Before Trump's pivot on tariffs on Wednesday afternoon, postponing many of them for 90 days, munis had risen 80 to 100 basis points over the week, "the highest absolute levels in five years and longer on the curve in over a decade," they said.
"Three-day moves of this magnitude have not been observed since the pandemic," Barclays strategists said.
However, Friday saw munis sell off once more with yields cut 17 to 28 basis points, depending on the scale, pushing muni-UST ratios higher but not quite reaching Wednesday's levels where ratios were over 100% out long.
The two-year ratio Friday was at 82%, 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 81%, the five-year at 80%, the 10-year at 81% and the 30-year at 94% at 4 p.m.
"This week has turned out to be one of the worst and most volatile ever for munis, especially for high-quality high-grade ones," said Barclays strategists Mikhail Foux and Grace Cen, noting it is reminiscent of what happened with munis during the onset of the COVID-19 pandemic.
During that time, they noted there were "very large swings of the AAA curve, while the rest of the market has been outperforming due to poor liquidity."
This week has boasted the fourth, fifth and eighth largest daily selloffs in the past 15 years, Barclays strategists said.
Most of the other large selloffs happened during the start of COVID-19 in March and April 2020, with the rest occurring during the recent Federal Open Market Committee rate-hiking cycle and in the wake of Trump's win in 2016, they noted.
In these instances, "these sell-offs presented a buying opportunity, but it took some time for the market to stabilize, and we think the same will occur this year," Barclays strategists said.
Rate volatility served as the primary reason for this week's risk-off, "coupled with large net issuance, outflows (likely to continue for some time after this week), tax-related selling, as well as continued selling by ETFs and rather heavy positioning by primary dealers going into the current sell-off," they said.
And while the "market turned around in a hurry on Thursday with one of the best daily performances in recent history," Friday saw munis sell off once more, according to Barclays strategists.
"As typically happens in abrupt and large sell-offs, investors focused their selling on higher-rated names, with low-rated names actually outperforming," they said. "This was especially true for muni high yield, which outperformed the IG index (especially its long bucket) by a sizable amount, and now it is trading at the tightest level to high grade in recent history."
The real test in the marketplace will be next week, especially on the supply side, said Ron Banaszek, SVP and lead underwriter at Blaylock Van.
"Are we going to see the day-to-days come back into the market?" he said. The other question, according to Banaszek: Is next week's calendar going to be able to get done?
Both questions are hard to answer as financial markets are dealing with a lot of uncertainty, as headline risk coming out from Washington, D.C, and Trump is causing tons of volatility, Banaszek said.
Furthermore, "who knows what could happen over the weekend?" he said; What if Trump suddenly changes his mind about the 90-day tariff extension?
The president and any announcements that may come out before Monday are true wildcards, he said.
New-issue calendar
Issuance for the week of April 14 is estimated at $8.9 billion, with $7.955 billion of negotiated deals and $945 million of competitive deals on tap.
New York City leads the negotiated calendar with $1.75 billion of taxable GOs, followed by the Department of Airports for the City of Los Angeles with $1.477 billion of revenue bonds.
The competitive calendar is led by North Carolina with $300 million of limited obligation bonds.
Next week's new-issue calendar is up substantially from the previous, which was set at an estimated $10.686 billion but ended up being $3.96 billion as multiple issuers moved deals to the day-to-day calendar or postponed them due to extreme market volatility.
Some deals still priced, but they faced some difficulties.
"Wider spreads, concession. You had to do a lot with structure, 5.25s, 5.5s. It's almost become a deal by appointment market," said Jock Wright, an underwriter at Raymond James.
"It's going to be very challenging in this environment to provide liquidity to issuers, especially if you're an underwriter," he said, noting it may be difficult to get underwriters to want to commit a lot of capital and get under balances, "because everything you underwrite will probably be worth less the next day."
Many of the deals placed on the day-to-day calendar are waiting for stability to return to the marketplace, he noted.
Next week will be "tricky," because while it's a lighter calendar, if the deals on the day-to-day calendar price, that could send supply up to $20 billion, Wright said
However, "until we get a semblance of stability, I don't think we're going to be able to function very well," he said.
AAA scales
MMD's scale was cut 25 to 27 basis points: The one-year was at 3.21% (+27) and 3.23% (+27) in two years. The five-year was at 3.27% (+26), the 10-year at 3.66% (+25) and the 30-year at 4.64% (+25) at 3 p.m.
The ICE AAA yield curve was cut 17 basis points: 3.11% (+17) in 2026 and 3.13% (+17) in 2027. The five-year was at 3.25% (+17), the 10-year was at 3.58% (+17) and the 30-year was at 4.60% (+17) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut 28 basis points: The one-year was at 3.13% (+28) in 2025 and 3.13% (+28) in 2026. The five-year was at 3.32% (+28), the 10-year was at 3.62% (+28) and the 30-year yield was at 4.61% (+28) at 4 p.m.
Bloomberg BVAL was cut 25 to 28 basis points: 3.02% (+28) in 2025 and 3.09% (+27) in 2026. The five-year at 3.25% (+26), the 10-year at 3.58% (+25) and the 30-year at 4.61% (+25) at 4 p.m.
Treasuries saw losses 10 years and in.
The two-year UST was yielding 3.855% (+9), the three-year was at 3.998% (+8), the five-year at 4.148% (+8), the 10-year at 4.472% (+4), the 20-year at 4.908% (flat) and the 30-year at 4.847% (-3) near the close.
Primary to come
New York City (Aa2/AA/AA/AA+/) is set to price Tuesday $1.75 billion of taxable GOs, serials 2027-2040, terms 2045, 2055. RBC Capital Markets.
The Los Angeles Department of Airports (Aa3//AA-/) is set to price Wednesday a deal $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.
Oregon (Aa1/AA+/AA+/) is set to price Tuesday $928.435 million of GOs, consisting of $462.08 million of non-AMT Series A bonds, serials 2026-2045, term 2050; $301.165 million of taxable Series B bonds; S156.065 million of non-AMT Series C bonds, serials 2026-2045; and $9.125 million of non-AMT Series D bonds, serials 2026-2040. J.P. Morgan.
The Dormitory Authority of the State of New York (Aa3/AA-/AA/) is set to price Tuesday $466.55 million of revenue bonds on behalf of the Memorial Sloan Kettering Cancer Center, consisting of $234.24 million of Series S1, $117.38 million of Series 2-A and $114.93 million of Series 2-B. J.P. Morgan.
The
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 Houston Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $186.155 million of PSF-insured limited tax refunding bonds, Series 2025B, serial 2026. RBC Capital Markets.
The Hayward Unified School District, California, (A1/AA//) is set to price Tuesday $160.48 million of Assured Guaranty-insured GOs, consisting of $61.49 million of Election of 2024 bonds, Series 2025A; $29.605 million of refunding bonds, Series 2025A; and $42.975 million of Series 2025B. RBC 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 New York City Housing Development Corp. (Aa2/AA+//) is set to price Tuesday $157.245 million of sustainable development multi-family housing revenue bonds, consisting of $63.89 million of 2025 Series B-1, serials 2030-2037, terms 2040, 2045, 2050, 2055, 2060, 2064, and $93.355 million of Series B-2, term 2064. 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.
The Manteca Unified School District, California, (Aa2///) is set to price Tuesday $149.54 million of GOs, consisting of $130 million of Election of 2020 Series C bonds and $19.54 million of refunding bonds. Piper Sandler.
Hawaii County (/AA+/AA+/) is set to price Wednesday $139.325 million of GOs, serials 2026-2049. BofA Securities.
The Gunnison County Housing Authority (/AA//) is set to price Tuesday $118.18 million of BAM-insured Whetstone Housing Project general revenue bonds, serials 2027-2045, terms 2047, 2050, 2055, 2059. Northland Securities.
The Osceola County School District, Florida, (Aa2//AA/) is set to price Tuesday $106.505 million of capital outlay sales tax revenue bonds, serials 2026-2036. Raymond James.
Competitive
North Carolina is set to sell $300 million of Build NC limited obligation bonds, Series 2025A, at 11 a.m. eastern Tuesday.
The Tennessee State School Bond Authority is set to sell $160.495 million of higher educational facilities second program bonds, Series 2025A, at 11 a.m. Monday and $53.665 million of higher educational facilities second program bonds, Series 2025B, at 11:30 a.m. Monday.
