Municipals were little changed Friday ahead of another robust new-issue week while U.S. Treasuries made some gains and equities closed in the black.
"Strong September employment numbers and a somewhat higher CPI reading continued to reverberate through the bond market," said BofA Global Research strategists Yingchen Li and Ian Rogow in a weekly report. "This, combined with election rhetoric in October, pushed macro rates into uncertainty at this point."
They note the next jobs report at the beginning of November "should offer much more clarity regarding the market's direction."
Li and Rogow said before that happens, they believe "investors should remain vigilant and exercise some discipline by employing some light hedges in dealing with this volatile month of October."
Despite this week's underperformance, exempt investment-grade munis continue to outperform taxable sectors, they added. Positive factors they have discussed recently remain in place: "a post-election slowdown in issuance likely has started earlier in October, muni/Treasury ratios continue to look benign despite macro rates volatilities, and muni credit spreads came in a few basis point since Oct. 4 after the September employment report was released."
The two-year muni-to-Treasury ratio Thursday was at 62%, the three-year at 62%, the five-year at 63%, the 10-year at 68% and the 30-year at 84%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 63%, the three-year at 63%, the five-year at 64%, the 10-year at 68% and the 30-year at 83% at 4 p.m.
Barclays' Mikhail Foux noted that as rates came down slightly this week and muni-UST ratios have increased, there have been very few Build America Bond refundings as of late; "on the flip side, tenders remain quite popular, and 2024 has already become the largest year for announced tenders on record with 2.5 months still to go."
Supply has been the main muni story in the past several months, Foux said. "As expected, issuance should remain robust until the elections. However, even November and December weekly supply might remain heavy enough, especially if we account for the number of weeks in November and December when issuance should remain subdued due to holidays, elections or economic releases."
Total issuance is estimated at about $12 billion for the upcoming week, led by New York issuers. The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price $1.5 billion of future tax-secured subordinate bonds while the New York Transportation Corp. is set to price Tuesday $1.499 billion of JFK Airport Terminal 6 Redevelopment Project AMT revenue bonds, The New York Metropolitan Transportation Authority (A3/A-/AA/AA) will bring $485 million of transportation revenue refunding Climate Bond certified green bonds Tuesday.
Bond Buyer 30-day visible supply sits at $15.16 billion.
"Looking ahead to 2025, we expect yet another heavy supply year, as refundings should gain a larger share of total supply, while new-money issuance should also remain healthy," Foux said.
Li and Rogow have released preliminary estimates of total 2025 issuance at $520 billion. "Without considering the likely large positive flows into mutual funds, our estimated principal redemption and coupon payments" — which they peg at $480 billion and $160 billion, respectively, "show that muni market investors will have plenty of available cash to absorb our estimated record issuance."
AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 2.73% and 2.47% in two years. The five-year was at 2.44%, the 10-year at 2.78% and the 30-year at 3.66% at 3 p.m.
The ICE AAA yield curve was cut one to two basis points in spots: 2.76% (unch) in 2025 and 2.53% (unch) in 2026. The five-year was at 2.46% (+1), the 10-year was at 2.77% (+2) and the 30-year was at 3.62% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.75% (unch) in 2025 and 2.51% (unch) in 2026. The five-year was at 2.44% (unch), the 10-year was at 2.74% (unch) and the 30-year yield was at 3.61% (unch) at 4 p.m.
Bloomberg BVAL was unchanged: 2.73% in 2025 and 2.48% in 2026. The five-year at 2.45%, the 10-year at 2.72% and the 30-year at 3.59% at 4 p.m.
Treasuries saw gains.
The two-year UST was yielding 3.946% (-4), the three-year was at 3.857% (-4), the five-year at 3.875% (-3), the 10-year at 4.077% (-2), the 20-year at 4.445% (-1) and the 30-year at 4.384% (-1) at the close.
Primary to come
The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price $1.5 billion of future tax-secured subordinate bonds, Fiscal 2025 Series D, Wednesday, retail Tuesday. Siebert Williams Shank & Co.
The New York Transportation Corp. is set to price Tuesday $1.499 billion of JFK Airport Terminal 6 Redevelopment Project AMT revenue bonds, consisting of $1.41 billion of Series 2024A (Baa3/BBB-//) and $89.997 billion of Series 2024B (A1/AA//AA+), insured by Assured Guaranty. Goldman Sachs & Co. LLC
The New York Metropolitan Transportation Authority (A3/A-/AA/AA) is set to price Tuesday $485 million of transportation revenue refunding green bonds, Climate Bond certified. Siebert Williams Shank & Co.
The Comal Independent School District, Texas, (Aaa///) is set to price Tuesday $394.41 million of unlimited tax school building and refunding bonds, PSF, serials 2025-2044, term 2049. Baird.
The City of Springfield, Illinois, (A3/AA//) is set to price Tuesday $352.79 million of senior lien electric revenue refunding bonds, insured by BAM. J.P. Morgan Securities LLC.
The Ohio Housing Finance Agency (Aaa///) is set to price Wednesday $275 million of residential mortgage non-AMT social revenue bonds (Mortgage-Backed Securities Program). J.P. Morgan Securities LLC.
The Cerritos Community College District, California, (Aa1/AA//) is set to price Tuesday $222.82 million of general obligation refunding bonds, consisting of $100 million of GOs, serials 2025-2044, term 2049, and $122.82 million of refunding bonds, serials 2025-2044. RBC Capital Markets.
The Regents of the University of Colorado (Aa1//AA+/) is set to price Wednesday $220.465 million of university enterprise refunding revenue bonds. Morgan Stanley & Co. LLC.
The Katy Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $215.085 million of unlimited tax refunding bonds, PSF, serials 2025-2045. BOK Financial Securities, Inc.
The Connecticut Housing Finance Authority (Aaa/AAA//) is set to price Wednesday $206.405 million of housing mortgage finance program social bonds, 2024 Subseries F-1. Morgan Stanley & Co. LLC.
The School District of Pasco County, Florida, (Aa3//AA/) is on the day-to-day calendar with $197.195 million of sales tax revenue bonds, serials 2025-2039. BofA Securities.
The Lamar Consolidated Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $190.99 million of unlimited tax refunding bonds, PSF, serials 2026-2044. RBC Capital Markets.
Fircrest Properties, Washington, (/AA//) is set to price Wednesday $186.54 million of lease revenue sustainability bonds, serials 2028-2044, term 2049. BofA Securities.
The Tomball Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $181.465 million of unlimited tax building and refunding bonds, PSF, serials 2025-2050. Raymond James & Associates, Inc.
The City of Wilkes-Barre Finance Authority, Pennsylvania, (nonrated) is set to price Tuesday $180 million of WoodBridge Healthcare, Inc. Project hospital revenue bonds. Ziegler.
The Idaho Housing and Finance Association (Aa1///) is set to price $175 million of taxable single family mortgage bonds, serials 2025-2036, terms 2039, 2044, 2049, 2055, 2065. BofA Securities.
The Virginia Small Business Financing Authority (//BBB/) is set to price Thursday $166.685 million of revenue bonds, consisting of $143.665 million of Series 2024A, $9.48 million of Series B-1 entrance fee redemption bonds and $13.54 million of Series B-2 entrance fee redemption bonds. HJ Sims & Co.
The Conroe Independent School District, Texas, (Aaa/AAA//) is set to price Thursday $129.49 million of unlimited tax refunding bonds, PSF, serials 2026-2036. Jefferies LLC.
Spokane County, Washington, (A2/A//) is set to price Tuesday $129.145 million of non-AMT and AMT airport revenue bonds, consisting of $34.28 million of non-AMT, serials 2026-2044, terms 2049, 2054, and $94.865 million of AMT, serials 2026-2044, terms 2049, 2054. Barclays Capital Inc.
North Slope Borough, Alaska, (/AA/AA/AA+) is set to price Wednesday $128.745 million of general obligation bonds, consisting of $104.085 general purpose, serials 2025-2036, and $24.66 million schools, serials 2025-2036. Jefferies LLC
The County of Cuyahoga, (A1/AA-//) is set to price Tuesday $127.6 million of Convention Hotel Project refunding certificates of participation, serials 2025-2044. PNC Capital Markets LLC.
The Maryland Health and Higher Educational Facilities Authority (A1/A+//) is set to price Thursday $117.015 million of Lifebridge Health Issue revenue bonds, terms 2049, 2054. BofA Securities.
The Intermountain Power Agency, Utah, (Aa3//AA-/) is set to price Thursday $114.62 million of tax-exempt and taxable power supply revenue bonds. Goldman Sachs & Co. LLC.
The South Carolina Jobs-Economic Development Authority (/BB//) is set to price Tuesday $112 million of Beaufort Medical Hospital & South of Broad Healthcare Project healthcare revenue bonds, serials 2027-2035, terms 2039, 2044, 2049, 2054. BofA Securities.
The California Housing Finance Agency (Aa2/AA//) is set to price Wednesday (retail Tuesday) $107.58 million of affordable housing sustainable revenue bonds. Morgan Stanley & Co. LLC.
The Ohio Water Development Authority (/AAA//) is set to price Thursday $102.02 million of fresh water revolving fund water development refunding revenue bonds, serial 2025-2042. Jefferies LLC.
Competitive:
St. Johns County, Florida, (Aaa/AA+//) is set to sell $105.17 million of special obligation revenue bonds at 10:30 a.m. ET Wednesday.
The Virginia Housing Development Authority is set to sell $106 million of taxable rental housing bonds at 11 a.m. ET Tuesday.
Highland Park ISD, Texas, (Aaa//AAA/) is set to sell $111.865 million of unlimited tax refunding bonds at noon ET Tuesday.
The Collin County Community College District, Texas, is set to sell $171.29 million of consolidated fund revenue bonds at 11:30 a.m. ET Wednesday.
