Municipals were steady Friday as U.S. Treasury yields fell slightly and equities ended lower.
The 10-basis-point-plus UST rally in the week of Jan. 13 led to slightly more attractive muni-UST ratios as munis lagged, but not for long, said Barclays strategist Mikhail Foux.
While UST yields were stable the week of Jan. 21, tax-exempts outperformed despite an "unusually heavy pipeline" for a holiday-shortened week, he said.
"And it does not seem that supply will start abating any time soon, which has been largely expected by market participants going into 2025, and all the noise surrounding a possible cancellation or capping of tax-exemption will likely keep issuers busy in the early part of this year," Foux said.
The Bond Buyer 30-day visible supply is at $9.631 billion
While tax-exempts were on the cheaper side — at least compared to recent history — at the start of the week, "they quickly caught up as the market felt quite strong," he said.
However, after outperforming USTs, tax-exempts returned to "rather unattractive territory," he said.
Overall, muni-UST ratios have been moving in "very tight ranges" over the last two to three months, Foux said, and are "squarely in the middle of this range." "Hence, it is very hard for us to be overly positive on munis at current levels," Foux said.
The two-year municipal to UST ratio Friday was at 64%, the five-year at 64%, the 10-year at 66% and the 30-year at 83%, according to Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 65%, the five-year at 64%, the 10-year at 66% and the 30-year at 81% at 4 p.m.
While ratios are low and spreads tight, the muni market continues to be "unappetizing," he said.
Few opportunities exist, "although one of the main ones is the current cheapness of a variety of California credits, which broadly underperformed in the aftermath of wildfires in southern California," he said.
The California index is the "one of the main laggards" this year after it underperformed the investment-grade index with a similar average maturity by about seven basis points since the fires began, Foux said.
"While LADWP and some related credits are clearly in the eye of the storm at the moment, there are a number of California opportunities that have become attractive," he said.
"With respect to the broad market outlook, while we became a bit more positive last week, our optimism was short-lived," Foux said. "After this week's performance, we are back to neutral and are still waiting for the market to back up in order to find a more attractive entry point."
New-issue calendar
Issuance for next week falls to an estimated $5.151 billion, with $3.959 billion of negotiated deals and $1.193 billion of competitive deals on tap.
The Oklahoma Turnpike Authority leads the negotiated calendar with $1.311 billion of Oklahoma Turnpike System second senior revenue bonds, followed by the Columbus Regional Airport Authority leads the negotiated calendar with $1.023 billion of revenue bonds.
The competitive calendar is led by Mecklenburg County, North Carolina, with $232.925 million of limited obligation bonds.
AAA scales
MMD's scale was unchanged: The one-year was at 2.72% and 2.74% in two years. The five-year was at 2.84%, the 10-year at 3.07% and the 30-year at 4.02% at 3 p.m.
The ICE AAA yield curve was bumped up to one basis point: 2.77% (-1) in 2026 and 2.78% (-1) in 2027. The five-year was at 2.85% (-1), the 10-year was at 3.08% (-1) and the 30-year was at 3.93% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.73% (unch) in 2025 and 2.77% (unch) in 2026. The five-year was at 2.83% (unch), the 10-year was at 3.05% (+1) and the 30-year yield was at 3.92% (unch) at 4 p.m.
Bloomberg BVAL was little changed: 2.70% (unch) in 2025 and 2.76% (unch) in 2026. The five-year at 2.87% (unch), the 10-year at 3.12% (unch) and the 30-year at 3.97% (unch) at 4 p.m.
Treasuries were slightly firmer.
The two-year UST was yielding 4.269% (-2), the three-year was at 4.327% (-3), the five-year at 4.427% (-3), the 10-year at 4.624% (-2), the 20-year at 4.917% (-2) and the 30-year at 4.850% (-2) at the close.
Primary to come
The Oklahoma Turnpike Authority (Aa3/AA-/AA-/) is set to price Tuesday $1.311 billion of Oklahoma Turnpike System second senior revenue bonds, consisting of $1.088 billion of Series 2025A bonds and $233.315 million of forward-delivery Series 2025B bonds. Goldman Sachs.
The Columbus Regional Airport Authority (A2/A//) is set to price Tuesday $1.028 billion of John Glenn Columbus International Airport airport revenue bonds, consisting of $836.475 million of Series 2025A AMT bonds, serials 2030-2045, terms 2050, 2055, and $191.445 million of Series 2025B non-AMT bonds, serials 2030-2045, terms 2050, 2055. RBC Capital Markets.
The Orlando Utilities Commission (Aa2//AA/) is set to price Tuesday $272.255 million of utility system revenue bonds, consisting of $186.455 million of Series 2025A bonds and $85.8 million of Series 2025B refunding bonds. Morgan Stanley.
The Sumter Landing Community Development District (/AA//) is set to price Tuesday $249.25 million of Assured Guaranty-insured taxable recreational revenue bonds, serials 2025-2035, terms 2045, 2054. Jefferies.
Temple University (Aa3/A+//) is set to price Wednesday $219.475 million of revenue refunding bonds, First Series of 2025, serials 2026-2045. Loop Capital Markets.
The Mesa County Valley School District No. 51 (Aa3/AA-//) is set to price Thursday $190 million of Colorado State Intercept Program-insured GOs, serials 2042-2049. RBC Capital Markets.
The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price Tuesday $160 million of taxable Class I single-family mortgage bonds, 2025 Series D-1, serials 2026-2036, terms 2040, 2044, 2055. RBC Capital Markets.
The Virginia Housing Development Authority (Aaa/AAA//) is set to price Tuesday $150 million of taxable 2025 Series A commonwealth mortgage bonds. Morgan Stanley.
The Highline School District No. 401, Washington, (Aaa///) is set to price Tuesday $133.495 million of Washington School District Credit Enhancement Program-insured unlimited tax GOs. Piper Sandler.
The New York State Environmental Facilities Corp. (Aaa/AAA/AAA/) is set to price Tuesday $132.245 million of green State Revolving Funds revenue bonds, consisting of $124.885 million of tax-exempts, Series 2025A, serials 2025-2044, terms 2049, 2054, and $7.39 million of taxables, Series 2025B, terms 2029, 2034. RBC Capital Markets.
The Public Finance Authority is set to price Wednesday $112.61 of non-rated essential housing revenue bonds, consisting of $93.775 million of senior bonds, Series 2025A, and $18.835 million of junior bonds, Series 2025B. Jefferies.
L'Anse Creuse Public Schools, Michigan, (/AA//) is set to price Tuesday $102.795 million of Michigan School Bond Qualification and Loan program-insured 2025 school building and site unlimited tax GOs, Series I. J.P. Morgan.
The Missouri Housing Development Commission (/AA+//) is set to price Monday $100 million of non-AMT First Place Homeownership Loan Program single-family mortgage revenue bonds, 2025 Series A, serials 2026-2037, terms 2040, 2045, 2050, 2055, 2056. Raymond James.
Competitive
Mecklenburg County, North Carolina, (Aa1/AA+/AA+/) is set to sell $232.925 million of limited obligation bonds, at 11 a.m., Eastern, Tuesday.
The Tamalpais Union High School District, California, (Aaa///) is set to sell $175 million of GO 2024 Election bonds, 2025 Series A, at noon Tuesday.
The Bristol-Plymouth Regional Vocational Technical School District, Massachusetts, is set to sell $120 million of state-qualified GO school bonds at 11 a.m., Wednesday.
Frederick County, Maryland, (Aaa/AAA/AAA) is set to sell $194.185 million of GO public facilities project bonds, Series 2025A, at 10:30 a.m., Thursday.
