Municipals sold off hard Monday with AAA yields rising as much as 35 basis points, taking cues from U.S. Treasury market losses amid severe global market volatility as President Donald Trump's sweeping tariffs take hold.
Muni yields were cut 28 to 35 basis points, depending on the curve, the largest single-session move for the curve since
Muni-UST ratios rose as a result. The two-year municipal to UST ratio Monday was at 74%, the five-year at 76%, the 10-year at 80% 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 75%, the five-year at 78%, the 10-year at 82% and the 30-year at 98% at 4 p.m.
Tariffs have been discussed for weeks, and "when Trump announced 'Liberation Day,' you would have thought that over time, you would have seen some market reaction and deterioration and get worse as you got closer. But it wasn't the case. Munis were responding to supply and other technicals in the market, and all of a sudden the bottom drops out because [Trump] decides tariffs are moving forward," said Ajay Thomas, head of public finance at FHN Financial.
"The changing momentum on what the market is looking for on tariffs and the volatility in the equity market is spilling over into the Treasury market, and munis can only fight the Treasury market for so long," said Pat Luby, head of municipal strategy at CreditSights.
"Wednesday's 'Liberation Day' sparked a global sell-off in the equity markets, as the magnitude of the announced tariffs were more aggressive than most had expected," leading to a flight-to-quality and fixed-income markets rallied strongly, said Daryl Clements, a portfolio manager at AllianceBernstein.
Some market participants believed that bond yields would continue to decline and there would be more of a flight to safety phenomenon on Monday as well, but that didn't happen, Thomas said.
The extreme volatility in the headlines with equities and broader fixed income typically keeps retail investors on the sidelines, Luby noted.
There has been some buying going on Monday, but it's not overwhelming, he said.
The selloff is a direct reaction to the uncertainty around where the tariff policy will be, Thomas said.
However, the large selloff is somewhat unusual for munis as the market is dependent on both direct and indirect retail investors and muni yields tend to rally in very small increments, and when prices fall, they fall quickly, according to Luby.
It takes a while to get retail on board with taking lower yields on bonds and get there; it also takes a while for the market to continue to grind higher and higher, he said.
The latter usually happens when there's something that frightens retail or creates anxiety among investors, Luby said.
"We've got all these crazy market conditions and the investment markets are conflated in many people's minds with the economy," he said. "We don't know if this market volatility is going to translate into the actual economy," he said.
The market does not like Trump's sweeping tariffs, and there has been a "swift" reaction to it, but Trump remains committed to the announced tariffs, the first of which will go into effect Wednesday, Thomas said.
Losses across fixed income and equities stemmed from rumors surrounding Trump imposing a 90-day tariff extension on his tariff rollout, which the White House denied and referred to as "fake news," said Tim McGregor, a managing partner at Riverbend Capital Advisor.
Trump said he is open to negotiating the tariffs with other countries Monday, as he posted on Truth Social "tough but fair parameters are being set." He later posted negotiations would start with other countries — outside of China, which Trump threatened with additional tariffs of 50% if it did not remove its retaliatory tariff of 34%.
Trump has had a couple of good calls with countries that want to come to the negotiating table, so the market reacts to that, but then he counters with a potential increase of tariffs on China, prompting a negative reaction, Thomas said.
So, he said, depending on Trump's comments, markets will react until they have some clear-cut metric or policy or the announcement of more uniform negotiations.
However, "in the world of uncertainty, there are a few certain things about the muni market you can count on. One of them is supply, which will continue to come to the market $10 to $12 billion a week," McGregor said.
Issuance this week is heavy at an estimated $10.69 billion, led by New York City with $1.57 billion of GOs.
But while the muni market has seen a "decent calendar building," the volatility may put a lot of deals on the sidelines, Luby said.
April is a light month for redemption flows, "so hopefully over the next week or two, we'll get some stability into the marketplace, and we'll probably see some new money deals start to come back onto the calendar," but the return of refunding deals remains less clear, he said.
"Even if the tariff headlines recede and there is some stability and understanding about what the landscape is going to look like, munis will still face headwinds, as we're accumulating this backlog of supply," Luby said.
AAA scales
MMD's scale was cut 30 to 35 basis points: The one-year was at 2.73% (+30) and 2.75% (+30) in two years. The five-year was at 2.92% (+33), the 10-year at 3.32% (+35) and the 30-year at 4.34% (+35) at 3 p.m.
The ICE AAA yield curve was cut 28 basis points: 2.75% (+28) in 2026 and 2.78% (+28) in 2027. The five-year was at 2.92% (+28), the 10-year was at 3.29% (+28) and the 30-year was at 4.34% (+28) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut 32 to 33 basis points: The one-year was at 2.74% (+33) in 2025 and 2.75% (+33) in 2026. The five-year was at 2.92% (+32), the 10-year was at 3.11% (+32) and the 30-year yield was at 4.30% (+32) at 4 p.m.
Bloomberg BVAL was cut 30 to 35 basis points: 2.64% (+30) in 2025 and 2.73% (+30) in 2026. The five-year at 2.93% (+32), the 10-year at 3.27% (+34) and the 30-year at 4.31% (+35) at 4 p.m.
Treasuries sold off.
The two-year UST was yielding 3.758% (+10), the three-year was at 3.765% (+13), the five-year at 3.863% (+12), the 10-year at 4.172% (+18), the 20-year at 4.637% (+20) and the 30-year at 4.604% (+20) near the close.
Primary to come
New York City (Aa2/AA/AA/AA+/) is set to price Tuesday $1.571 billion of GOs, consisting of $1.5 million of Fiscal 2025 Series G, Subseries G-1, serials 2027-2046, terms 2050, 2053, and $70.77 million of Fiscal 2012 Series D, Subseries D-3A, serials 2027-2028, 2037-2039. Loop Capital Markets.
Bon Secours Mercy Health (A1/A+/AA-/) is set to price Tuesday $705.7 million of hospital facilities revenue bonds, Series 2025A: $391.225 million through the Allen County, Ohio; $69.585 million through the South Carolina Jobs-Economic Development Authority; and $244.89 million through the Henrico County Economic Development Authority of Virginia. RBC Capital Markets.
The health system is also set to price $185.545 million of long-term mode hospital facilities revenue bonds: $119.42 million through Allen County, Ohio, and $66.125 million through the South Carolina Jobs-Economic Development Authority. RBC Capital Markets.
The California State Public Works Board (Aa3/A+/AA-/) is set to price Tuesday $585.92 million of various capital projects lease revenue bonds, 2025 Series A, serials 2026-2045, term 2050. Ramirez.
The Oregon Department of Administrative Services (Aa2/AAA//AAA/) is set to price Tuesday $466.095 million of tax-exempt projects and refunding Oregon State lottery bonds, 2025 Series A. Jefferies.
The Aurora Public Schools Joint School District No. 28J (Aa2/AA//) is set to price Wednesday $450 million of Colorado State Intercept Program-insured GOs, serials 2025-2026, 2033-2047. Stifel.
The Broward County School Board, Florida, (Aa3/AA/A+/) is set to price a $308.89 million deal: $206.045 million of COPs, Series 2025A, and $102.845 million of Assured Guaranty-insured GO school refunding bonds, serials 2026-2032. J.P. Morgan.
Wake County, North Carolina, (Aa1/AA+/AA+/) is set to price Wednesday $276.825 million of limited obligation bonds, consisting of $266.185 million of Series 2025A, serials 2026-2044, and $10.64 million of Series 2025B, serials 2026-2044. J.P. Morgan.
Austin, Texas, (A1/A+//AA-/) is set to price Tuesday $233.82 million of AMT airport system revenue refunding bonds, serials 2026-2044. Siebert Williams Shank.
The Colorado Bridge and Tunnel Enterprise (A1/AA//) is set to price Tuesday $212.455 million of Assured Guaranty-insured senior infrastructure revenue bonds, Series 2025A, serials 2029-2045, terms 2050, 2054. J.P. Morgan.
The Connecticut Health and Educational Facilities Authority (A3/A-//) is set to price Wednesday $188.78 million of Quinnipiac University Issue revenue refunding bonds, Series O, serials 2026-2036, 2041-2045. Barclays.
Howell Public Schools, Michigan, (/AA//) is set to price Tuesday $180.905 million of Michigan School Bond Qualification and Loan Program-insured GO unlimited tax 2025 school building and site bonds, Series II, serials 2026-2045. J.P. Morgan.
The Inglewood Unified School District, California, (A3//AA+/) is set to price Wednesday $165 million of Election of 2020 GOs, Series B, serials 2026-2043. Stifel.
The Arizona Board of Regents (Aa3/AA-//) is set to price Tuesday $160.815 million of University of Arizona system revenue and revenue refunding bonds, consisting of $119.34 million of Series A, serials 2026-2045, terms 2050, 2055, and $41.475 million of Series B, serials 2027-2045. J.P. Morgan.
Pflugerville, Texas, (/AA+//AA+/) is set to price Tuesday a $157.93 million deal: $127 million of combination tax and limited revenue certificates of obligation, serials 2025-2045, terms 2050, 2055, and $30.93 million of limited tax refunding bonds, serials 2025-2045. Siebert Williams Shank.
The STC Metropolitan District No. 2, Colorado, is set to price Thursday a $155.155 million deal: $87 million of Assured Guaranty-insured Series 2025A-1 bonds (A1/AA//), $46.445 million of non-rated Series 2025A-2 bonds and $21.71 million of non-rated Series 2025B bonds. D.A. Davidson.
The Harris County Cultural Education Facilities Finance Corp. (/A//) is set to price Tuesday $150 million of Baylor College of Medicine medical facilities mortgage revenue bonds, Series 2025A. Barclays.
The Massachusetts Development Finance Agency (//A-/) is set to price Tuesday $133.12 million of Lasell Village revenue and revenue refunding bonds, serials 2026-2037, terms 2040, 2045, 2050, 2055. Barclays.
The Capital Projects Finance Authority is set to price Thursday $129.64 million of Millenia Orlando Project senior living revenue bonds, Series 2025A. H.J. Sims.
The San Bernardino City Unified School District, California, (/AA//) is set to price Wednesday a $125 million deal: $95 million of COPs and $30 million of GO refunding bonds. Baird.
The Indianapolis Local Public Improvement Bond Bank (AA-//) is set to price Tuesday $125 million of Indianapolis Public Transportation Corp. Project local income tax revenue bonds, Series 2025 A, serials 2025-2045. Stifel.
The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price Tuesday $122.735 million of Class I social single family mortgage bonds, consisting of $9.5 million of AMT 2025 Series E bonds, 2026-2028, term 2040; $45.5 million of non-AMT 2025 Series F bonds, term 2055; and $67.735 million of taxable 2025 Series G-1 bonds, serials 2026-2037, terms 2040, 2046, 2055. BofA Securities
The California State Public Works Board (Aa3/A+/AA-/) is set to price Tuesday $103.71 million of lease revenue bonds, Series B, serials 2026-2034. Wells Fargo.
The Duval County School Board, Florida, (/AA/A+/) is set to price Tuesday $102.805 million of Assured Guaranty-insured refunding COPs, Series 2025A, serials 2025-2033. RBC Capital Markets.
Competitive
Louisiana is set to sell $351.13 million of GOs, Series 2025-B, at 10:30 a.m. Wednesday.
Anne Arundel County, Maryland, is set to sell $267.545 million of GOs at 10:45 a.m. Wednesday and $151.59 million of GOs at 11:15 a.m. Wednesday.
Gaston County, North Carolina, is set to sell $178 million of GOs at 11 a.m. Tuesday.
The Tennessee State School Bond Authority is set to sell $160.495 million of higher educational facilities second program bonds, 2025 Series A, at 10 a.m. Wednesday.
The Charleston County School District, South Carolina, is set to sell $154.325 million of GO bond anticipation notes, Series 2025B, at 11 a.m. Thursday.
The Berkeley Unified School District, California, is set to sell $150 million of Election of 2020 GOs, Series E and Series F, at 11:15 a.m. Wednesday.
