Municipals were steady Monday as U.S. Treasuries were slightly weaker and equities ended mixed.
The two-year muni-to-Treasury ratio Monday was at 62%, the three-year at 65%, the five-year at 66%, the 10-year at 71% and the 30-year at 87%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 43%, the three-year at 65%, the five-year at 66%, the 10-year at 70% and the 30-year at 88% at 3:30 p.m.
With only one week left in August, munis are seeing gains of 0.78% this month, pushing year-to-date returns to 1.28%, said Jason Wong, vice president of municipals at AmeriVet Securities.
This is a "stark reversal" for August returns from last year, as muni were seeing losses of 1.79% "as the Fed was still in rate hike mode to combat high inflation," he said.
Muni yields in August 2023 rose by an average of 26 basis points across the curve, with 10-year notes rising around 36 basis points, Wong said.
Month-to-date, 10-year muni yields have fallen by an average of 2.5 basis points, "with the front end seeing yields drop by an average of 22 basis points, and the long end remaining flat," he said.
"With Fed Chair [Jerome] Powell stating late last week that it was time to adjust its policy and cut rates, we should expect to see the market react to his statements by pushing muni yields lower as we have already seen Treasury yields tumble and stocks rise after he spoke," Wong said.
"The summer slowdown was apparent over the past week, as holidays and absences contributed to a slightly less active week," said Chris Brigati, senior vice president and director of strategic planning and fixed-income research at SWBC.
Except for the front end of the muni curve, the market was "much less reactive" to the UST swings last week, but did play a slight catch-up following Powell's speech on Friday.
Most of the focus remained on new issues last week, but separately managed accounts "helped drive the front end of the MMD curve 12-13bps lower," said Birch Creek strategists in a weekly report.
Some interest started to "perk up" in the secondary market, especially out long where 30-year muni-UST ratios neared 90%, they said.
"The forward calendar shows issuance will be above average over the next few weeks, while reinvestment cash is set to drop off," Birch Creek strategists said.
Ahead of the Labor Day holiday, issuance this week is "relatively average" at $8.9 billion, Brigati said.
In the primary market Monday, BofA Securities held a one-day retail order for $2.617 million of various purpose GOs from California (Aa2/AA-/AA/). The first tranche, $817.52 million of new-money bonds, saw 5s of 8/2026 at 2.49%, 5s of 2029 at 2.52%, 5s of 2033 at 2.81%, 5s of 2036 at 2.95%, 5.25s of 2044 at 3.47%, 5s of 2049 at 3.73%, 5.25s of 2049, 5.5s of 2049 at 3.62%, 4s of 2054 at 4.14%, 5.25s of 2054 and 5.5s of 2054 at 3.71%, callable 8/1/2034.
The second tranche, $1.799 billion of refunding bonds, with 5s of 8/2025 at 2.53%, 5s of 2029 at 2.52%, 5s of 2034 at 2.85%, 5s of 2039 at 3.17% and 5s of 2044 at 3.52%, callable 8/1/2034.
Supply will fall next week due to the holiday, but there are still some sizable deals on tap.
The North Texas Tollway Authority is set to price Sept. 5 $1.1 billion of first-tier and second-tier system revenue refunding bonds.
The New York City Transitional Finance Authority is set to price the week of Sept. 9 $1.8 billion of future tax-secured subordinate bonds.
The District of Columbia is set to price Sept. 10 $1.6 billion of new-issue and refunding GOs.
The Texas Transportation Commission is set to Sept. 10 $878 million of GO mobility fund refunding bonds.
The Empire State Development Corp. is set to sell the week of Sept. 16 $1.3 billion of sales tax revenue bonds.
Connecticut is set to price the week of Oct. 7 $935 million of GOs.
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 2.51% and 2.45% in two years. The five-year was at 2.42%, the 10-year at 2.69% and the 30-year at 3.57% at 3 p.m.
The ICE AAA yield curve was bumped up to a basis point: 2.59% (-1) in 2025 and 2.50% (-1) in 2026. The five-year was at 2.42% (-1), the 10-year was at 2.65% (-1) and the 30-year was at 3.58% (unch) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.57% in 2025 and 2.51% in 2026. The five-year was at 2.42%, the 10-year was at 2.66% and the 30-year yield was at 3.54% at 3 p.m.
Bloomberg BVAL was bumped up to a basis point: 2.51% (unch) in 2025 and 2.47% (unch) in 2026. The five-year at 2.46% (unch), the 10-year at 2.66% (-1) and the 30-year at 3.59% (unch) at 3:30 p.m.
Treasuries were a touch weaker.
The two-year UST was yielding 3.934% (+2), the three-year was at 3.745% (+2), the five-year at 3.665% (+2), the 10-year at 3.817% (+1), the 20-year at 4.195% (+1) and the 30-year at 4.106% (+1) at 3:30 p.m.
Primary to come:
Chicago (//A+/) is set to price Wednesday $1.004 billion of AMT and non-AMT Chicago O'Hare International Airport general airport senior lien revenue bonds, consisting of $563.945 million of AMT bonds, serials 2036-2044, terms 2048, 2053, 2059; and $440.045 million of non-AMT bonds, serials 2036-2044, terms 2048, 2053, 2059. Wells Fargo.
San Antonio, Texas, (Aa2/AA-/AA-/) is set to price Wednesday $763.795 million of electric and gas systems revenue refunding bonds, consisting of $489.525 million of Series 2024D and $274.27 million of Series 2024E. J.P. Morgan.
The Utah Transit Authority is set to price Wednesday $469.915 million in tow series, $327.39 million of sales tax revenue refunding bonds, Series 2024, (Aa2/AA+/AA/), serials 2030-2040; and $94.525 million of subordinated sales tax revenue refunding bonds, Series 2024, (Aa3/AA/AA/), serials 2037-2040. Wells Fargo.
The Maine Health and Higher Educational Facilities Authority (A1///) is set to price Tuesday $189.28 million of Northeastern University revenue bonds. Morgan Stanley.
Pennsylvania State University (Aa1/AA//) is set to price Tuesday $157.345 million of Series 2024 bonds. Morgan Stanley.
The Texas Veterans Land Board (Aaa///) is set to price Wednesday $135 million of taxable refunding veterans bonds, term 2051. Jefferies.
The Indiana Finance Authority (A3/A-//) is set to price Wednesday $133.96 million of Hendricks Regional Health health facility revenue refunding bonds. Piper Sandler.
Greenville, Texas, (/A//) is set to price Tuesday $128.245 million of electric system revenue and refunding bonds, serials 2027-2044, terms 2049, 2054. Jefferies.
The Alaska Housing Finance Corp. (Aa2/AA+//) is set to price $127.65 million of State Capital Project Bonds II, 2024 Series A, refunding, serials 2027-2037, terms 2038, 2039. Raymond James.
The Rhode Island Commerce Corp. (A2/AA-//) is set to price Tuesday $126.485 million of Rhode Island DOT grant anticipation bonds, serials 2032-2039. BofA Securities.
The University of Kentucky (Aa3/AA//) is set to price Wednesday $101.255 million of lease purchase obligations, UK Healthcare Cancer Center Parkin project, serials 2025-2044, terms 2049, 2054. BofA Securities.
Competitive:
Hamilton County, Tennessee, (Aaa/AAA/AAA/) is set to sell $229.31 million of GOs at 10 a.m. eastern Tuesday and $22.71 million of GO refunding bonds at 10 a.m. eastern Tuesday.
The Davis School District Board of Education, Utah, (Aaa///) is set to sell $100 million of GOs at 11:30 a.m. eastern Tuesday.
North Hempstead, New York, is set to sell $100.858 million of GO bond anticipation notes at 10:30 a.m. eastern Thursday.
