Municipals were little changed Tuesday as U.S. Treasury yields fell slightly and equities ended down.
The two-year municipal to UST ratio Tuesday was at 65%, the five-year at 69%, the 10-year at 73% and the 30-year at 92%, according to Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 65%, the five-year at 68%, the 10-year at 72% and the 30-year at 91% at 4 p.m.
"Heading into the month, we knew technical factors would be challenged given the increase in supply and quick decline in reinvestment capital," said Chris Brigati, managing director and chief investment officer at SWBC, and Ryan Riffe, senior vice president on SWBC's capital markets team.
"The negative backdrop of tax policy and economic uncertainty has added fuel to the fire," they said. "To make matters more challenging, the market is in the doldrums of tax season."
Munis had managed to "weather the volatility storm" seen in the Treasury market for most of the year, but this eventually had to end, they said.
Munis saw a "large negative correction" last week, with the biggest losses on the long end, which has lacked "strong buyer sponsorship" over the past several weeks, said Matt Fabian, a partner at Municipal Market Analytics.
Conversely, and likely in response to solid new-issue deal performance, "municipal offered side curves saw smaller losses, with long ends off only around 20 basis points," he said.
"Thus participants were split last week: buyers, perhaps concerned over the confluence of events (tax season, rising credit pressure on borrowers, very large new issue calendar, elevated tax risks, etc.), wanting more concessions than dealers were providing," Fabian said.
But, without "material customer selling pressure" after Monday, underwriters were able to place the new-issue calendar well, he said, noting "no notable issues needed price cuts to clear the primary," he said.
"While there has been some reported buying by relative value institutions amid higher ratios from the muni-centric price correction, the market as a whole may not rally this week," he said.
Muni yields were steady Monday and Tuesday ahead of Wednesday's conclusion of the Federal Open Market Committee meeting.
A difference between muni buyers and sellers, "drives MMA valuations to read the offered side as broadly overbought and thus vulnerable to still more correction in the next 10 days," Fabian said. "Which seems about appropriate right now: not only are investors still liquidating municipal money funds and [exchange-traded funds] to raise cash to pay their taxes, but the looming April reinvestment is extremely thin; yields need to be high to attract retail."
Issuance is just shy of $100 billion compared to $82.2 billion during the first 11 weeks of 2024, and full-year dealer estimates are rising, he said.
There is also elevated risk to the tax exemption as Congress figures how to afford the Tax Cuts and Jobs Act extension, Fabian noted.
In the primary market Tuesday, J.P. Morgan priced for institutions the Metropolitan Transportation Authority's (A3/A-/AA/AA/) $1.029 billion of climate bond certified transportation revenue refunding green bonds, Series 2025A, with 5s of 11/2027 at 2.97%, 5s of 2030 at 3.23%, 5s of 2035 at 3.74%, 5s of 2040 at 4.17%, 5.25s of 2045 at 4.56%, 4.625s of 2050 at 4.82% and 5.25s of 2055 at 4.76%, callable 5/15/2035.
BofA Securities priced for the Alabama Federal Aid Highway Finance Authority (Aa2/AAA//) $590.875 million of special obligation revenue bonds. The first tranche, $250 million of Series 2025A, saw 5s of 9/2026 at 2.70%, 5s of 2030 at 2.98%, 5s of 2035 at 3.36%, 5s of 2040 at 3.75% and 5s of 2045 at 4.21%, callable 3/1/2035.
The second tranche, $340.875 million of Series 2025B, saw 5s of 9/2026 at 2.70%, 5s of 2030 at 2.98%, 5s of 2035 at 3.36% and 5s of 2036 at 3.45%, callable 3/1/2035.
Goldman Sachs priced for the Grossmont Healthcare District, California, (Aa2///) $166.105 million of 2025 GO refunding bonds, Series F, with 5s of 7/2026 at 2.59%, 5s of 2032 at 2.90%, 5s of 2035 at 3.15% and 5s of 2040 at 3.64%, callable 7/15/2035.
In the competitive market, New York State (Aa1/AA+/AA+/) sold $339.285 million of tax-exempt GOs, Series 2025A, to Jefferies, with 5s of 3/2026 at 2.40%, 5s of 2030 at 2.60%, 5s of 2035 at 3.00%, 5s of 2040 at 3.47% and 5s of 2044 at 3.89%, callable 3/15/2035.
The state also sold $163.725 million of tax-exempt refunding GOs, Series 2025C, to Jefferies, with 5s of 3/2026 at 2.40%, 5s of 2030 at 2.60% and 5s of 2035 at 3.00%, noncall.
Wake County, North Carolina, (Aaa/AAA/AAA/) sold $275.02 million of GO public improvement bonds, Series 2025A, with 5s of 4/2026 at 2.67%, 5s of 2030 at 2.89%, 5s of 2035 at 3.17%, 5s of 2039 at 3.41% and 4s of 2044 at 4.13%, callable 4/1/2035.
AAA scales
MMD's scale was unchanged: The one-year was at 2.61% and 2.62% in two years. The five-year was at 2.80%, the 10-year at 3.12% and the 30-year at 4.20% at 3 p.m.
The ICE AAA yield curve was cut up to a basis point: 2.65% (unch) in 2026 and 2.64% (unch) in 2027. The five-year was at 2.81% (+1), the 10-year was at 3.13% (+1) and the 30-year was at 4.17% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.62% in 2025 and 2.63% in 2026. The five-year was at 2.78%, the 10-year was at 3.12% and the 30-year yield was at 4.18% at 4 p.m.
Bloomberg BVAL was unchanged: 2.55% in 2025 and 2.62% in 2026. The five-year at 2.77%, the 10-year at 3.06% and the 30-year at 4.15% at 4 p.m.
Treasuries were a touch firmer.
The two-year UST was yielding 4.039% (-1), the three-year was at 4.013% (-1), the five-year at 4.073% (-2), the 10-year at 4.282% (-2), the 20-year at 4.618% (-1) and the 30-year at 4.579% (-2) near the close.
Primary to come
The Public Finance Authority is set to price Wednesday $1.151 billion of Salina Economy Development Authority American Tire Works project current interest bonds, Series 2025A. HilltopSecurities.
The Pennsylvania Economic Development Financing Authority (A2/A/A/) is set to price Wednesday $387.3 million of fixed-rate mode UPMC revenue refunding bonds, Series 2025B, serials 2026-2045, terms 2050, 2055. RBC Capital Markets.
The authority is also set to price Wednesday $312.55 million of term-rate mode UPMC revenue bonds, Series 2025A. Barclays.
Core Natural Resources is set to price Wednesday $98.1 million of non-rated AMT solid waste disposal facility revenue bonds through the Pennsylvania Economic Development Financing Authority, $102.865 million of non-rated none-AMT port facilities refunding revenue bonds through the Maryland Economic Development Corp. and $106.355 million of non-rated AMT solid waste disposal facility revenue bonds through the West Virginia Economic Development Authority. Jefferies.
The Public Finance Authority (/BBB-//) is set to price Thursday $145.16 million of Lindenwood Education System educational facilities revenue bonds, consisting of $130.16 million of tax-exempt Series 2025A bonds, serials 2025-2035, term 2040; and $15 million of taxable Series 2025B bonds, serials 2027-2029 RBC Capital Markets.
Hamilton County, Ohio, (Baa3/BBB-//) is set to price Thursday $137.225 million of UC Health hospital facilities revenue refunding bonds, Series 2025A, serials 2030-2045, term 2051. RBC Capital Markets.
UC Health (Baa3/BBB-//) is set to price Thursday $122.464 million of taxable corporate CUSIPs, Series 2025B, serials 2035,2040. RBC Capital Markets.
Competitive
The Dormitory Authority of the State of New York is set to sell $2.041 billion of general purpose state personal income tax revenue bonds in five series: $577.68 million of tax-exempt Series 2025A Bidding Group 1 bonds at 10:15 a.m. Thursday; $533.915 million of tax-exempt Series 2025A Bidding Group 2 bonds at 10:45 a.m. Thursday; $437.43 million of tax-exempt Series 2025A Bidding Group 3 bonds at 11:15 a.m. Thursday; $435.43 million of tax-exempt Series 2025A Bidding Group 4 bonds at 11:45 a.m. Thursday; and $56.965 million of taxable Series 2025B bonds at 12:15 p.m. Thursday.
The Franklin Public School District, Wisconsin, is set to sell $145 million of GO school facility improvement bonds, Series 2025A, at 10:30 a.m. Wednesday.
