Municipals sold off Wednesday as yields saw double-digit cuts for the second time this month. U.S. Treasury yields rose out long and equities ended down.
Muni yields were cut two to 12 basis points, depending on the scale, while UST yields rose up to three basis points out long.
The two-year municipal to UST ratio Wednesday was at 69%, the five-year at 72%, the 10-year at 76% and the 30-year at 92%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 68%, the five-year at 72%, the 10-year at 76% and the 30-year at 92% at 4 p.m.
The Investment Company Institute reported inflows of $19 million for the week ending March 19, following $376 million of inflows the previous week. This differs from LSEG, which reported $216.4 million of outflows from muni mutual funds for the week ending March 19.
Exchange-traded funds saw inflows of $306 million after $750 million of outflows the week prior, per ICI data.
"The street has turned into an aggressive seller ahead of quarter-end, with primary supply adjusting lower to clear," said James Pruskowski, CIO of 16Rock Asset Management. "Liquidity is as strained as it has been in a long time, and credit spreads are widening to reflect the imbalance. With the rates market rallying more than selling off lately, hedged accounts are feeling the squeeze."
March weakness is expected, he noted, but the magnitude of this move isn't driven by asset class flows.
"We're navigating a crosscurrent of macro risks — tariffs, tax policy proposals, DOGE cuts, and evolving economic data — layered on top of a broader risk-off tone," Pruskowski said.
"Caution is the kind of catch-all word that sums up both a bigger picture of the buyside and secondary traders, which has been a pretty tough market," said Ron Banaszek, SVP and lead underwriter at Blaylock Van.
Muni-UST ratios have "widened out," which is a good thing from a longer-term perspective, for investors getting back in, but "tough if you're a secondary trader holding risk positions," he said.
Currently, "there's cash out there, and overall deals seem to be getting done," but it's tougher for well-known names that frequently come to market — like last week's New York City Transitional Finance Authority $2 billion-plus deal, he noted.
These names have to deal with finding the right spread in a market to bring in investors, "piquing their interest in a name that they probably already have plenty of," he said.
Away from those names, overall, the markets remain fairly orderly, according to Banaszek.
"The market is searching for a catalyst, and the current re-pricing is likely to be just that," Pruskowski said. "Valuations are sticking out, especially on a relative basis. Markets often overshoot in periods of uncertainty, but dislocation breeds opportunity. The setup for a turn is building, but with timing uncertain, patience and positioning will be key."
In the primary market Wednesday, J.P. Morgan priced for the Board of Regents of the Texas A&M University System (Aaa/AAA/AAA/) $378.695 million of Permanent University Fund refunding bonds, Series 2025A, with 5s of 7/2025 at 2.79%, 5s of 2030 at 3.07%, 5s of 2035 at 3.50%, 5s of 2050 at 4.43% and 5s of 2055 at 4.50%, callable 7/1/2035.
Raymond James priced for the Jefferson Public Building Authority (Aa1/AA+//) $107.21 million of School District of the City of Jefferson Project revenue bonds, with 5s of 2/2036 at 3.55%, 5s of 2040 at 3.87%, 5s of 2045 at 4.32%, 5s of 2050 at 4.47% and 4.5s of 2055 at 4.77%, callable 2/1/2035.
AAA scales
MMD's scale was cut four to 10 basis points: The one-year was at 2.66% (+4) and 2.75% (+6) in two years. The five-year was at 2.93% (+7), the 10-year at 3.30% (+10) and the 30-year at 4.29% (+10) at 3 p.m.
The ICE AAA yield curve was cut two to 12 basis points: 2.72% (+2) in 2026 and 2.73% (+5) in 2027. The five-year was at 2.92% (+6), the 10-year was at 3.28% (+9) and the 30-year was at 4.27% (+7) at 4 p.m.
The S&P Global Market Intelligence municipal curve cut four to nine basis points: The one-year was at 2.66% (+4) in 2025 and 2.71% (+6) in 2026. The five-year was at 2.92% (+8), the 10-year was at 3.27% (+9) and the 30-year yield was at 4.28% (+9) at 4 p.m.
Bloomberg BVAL cut four to 10 basis points: 2.59% (+4) in 2025 and 2.69% (+5) in 2026. The five-year at 2.90% (+7), the 10-year at 3.23% (+9) and the 30-year at 4.26% (+9) at 4 p.m.
Treasuries were weaker throughout most maturities.
The two-year UST was yielding 4.015% (flat), the three-year was at 4.008% (+2), the five-year at 4.089% (+2), the 10-year at 4.345% (+3), the 20-year at 4.719% (+3) and the 30-year at 4.693% (+3) near the close.
Primary to come
The Department of Airports of the City of Los Angeles (Aa3//AA-/) is set to price Thursday on behalf of the Los Angeles International Airport a $1.534 billion deal, consisting of $1.189 billion of green private activity/AMT subordinate revenue and refunding revenue bonds, serials 2026-2045, terms 2050, 2055; $175.58 million of private activity/AMT subordinate revenue and refunding revenue bonds, 2025 Series B, serials 2026-2045, terms 2050, 2055; and $169.495 million of governmental purpose/Non-AMT subordinate refunding revenue bonds, 2025 Series C, serials 2026-2045. Barclays.
Kansas City, Missouri, (Aa2/AA+//) is set to price Thursday $144.315 million of water revenue bonds, Series 2025A. Morgan Stanley.
Competitive
The Davis School District Board of Education, Utah, is set to sell $100 million of Utah School District Bond Guaranty Program GOs at 11:30 a.m. Thursday.
