Yields fall as markets await Trump tariff announcement

Municipals were firmer once more Tuesday, as U.S. Treasury yields fell and equities ended mixed ahead of the Trump administration's looming announcement Wednesday of even more tariffs.

The two-year municipal to UST ratio Tuesday was at 68%, the five-year at 72%, the 10-year at 77% and the 30-year at 93%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 67%, the five-year at 71%, the 10-year at 75% and the 30-year at 92% at 4 p.m.

With supply up 14.5% year-over-year in the first quarter and "demand negative for three consecutive weeks, the muni market [was] feeling the weight of these negative technicals, which have caused munis to become cheap relative to US Treasuries," said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

However, he noted, "when munis become too cheap, they eventually rally." MMD's AAA yield curve has seen yields fall by five to 12 basis points over the past three trading sessions.

Despite the strength in the muni market, "this week sets up with significant opportunity for rate and municipal market volatility, with potential tariff implementation on April 2, an expected ruling from the Senate Parliamentarian … regarding the "current policy baseline" scoring method, and the release of first tier data, including [nonfarm payroll] on Friday," said J.P. Morgan strategists, led by Peter DeGroot.

Furthermore, this week's estimated $9.3 billion of supply could again "challenge" the market, they said.

However, J.P. Morgan strategists anticipate "more stable valuations due to improved relative value conditions and the influx of April reinvestment capital."

Additionally, the technical picture will probably slightly improve over the next couple of weeks as April 1 coupon payments hit the market, Clements said.

Muni investors will receive $15 billion of principal in April, down 28% month-over-month from March's $21 billion and around half of the 12-month average of $31 billion, said Pat Luby, head of municipal strategy at CreditSights.

April's redemptions, he said, are expected to be the lowest of this year and a 24-month low.

Issuers will be paid an estimated $10 billion of interest in April, with $9 billion paid out April 1, according to Luby.

"After April's lull, reinvestment demand should start to tick up in May when investors will receive $23 billion of principal ($15 billion on May 1) and $12 billion of interest ($7 billion on May 1)," he said.

In the primary market Tuesday, J.P. Morgan held a one-day retail order for California's (Aa2/AA-/AA/) $2.643 billion of various purpose GOs. The first tranche, $1.215 billion of new-issue bonds, saw 5s of 3/2028 at 2.84%, 5s of 2029 at 2.90%, 5s of 2042 at 4.05%, 5s of 2044 at 4.29%. 4.25s of 2049 at 4.50%, 5s of 2049 at 4.34% and 5s of 2055 at 4.40%, callable 3/1/2035.

The second tranche, $1.428 billion of refunding bonds, saw 5s of 3/2026 at 2.73%, 5s of 2030 at 3.01%, 5s of 2035 at 3.51%, 5s of 2038 at 3.71%, 4.125s of 2045 at 4.42% and 5s of 2045 at 4.26%, callable 3/1/2035.

Jefferies priced for institutions the Illinois Finance Authority's (/AAA/AAA/) $857.995 million of green Clean Water Initiative Revolving Fund revenue bonds. The first tranche, $500 million of Series 2025A bonds, saw 5s of 1/2026 at 2.67%, 5s of 1/2030 at 3.04%, 5s of 7/2030 at 3.04%, 5s of 1/2035 at 3.48%, 5s of 7/2035 at 3.50%, 5s of 7/2040 at 3.91% and 5s of 7/2045 at 4.28%, callable 7/1/2035.

The second tranche, $248.905 million of Series 2025B refunding bonds, saw 5s of 1/2028 at 2.87%, 5s of 1/2030 at 3.04%, 5s of 7/2030 at 3.04%, 5s of 1/2035 at 3.48%, 5s of 7/2035 at 3.50% and 5s of 7/2037 at 3.69%, callable 7/1/2035.

The third tranche, $109.05 million of forward-delivery Series 2025C refunding bonds, saw 5s of 1/2026 at 2.93%, 5s of 1/2030 at 3.27%, 5s of 7/2030 at 3.27%, 5s of 1/2035 at 3.71%, 5s of 7/2035 at 3.73% and 5s of 1/2036 at 3.81%, callable 7/1/2035.

Frost Bank priced for the Frenship Independent School District, Texas, (Aaa//AAA/) $145.475 million of PSF-insured unlimited tax school building bonds, switch 5s of 2/2026 at 2.76%, 5s of 2030 at 3.05%, 5s of 2035 at 3.46%, 4s of 2040 at 4.04%, 5s of 2045 at 4.24%, 5s of 2051 at 4.36% and 5s of 2055 at 4.39%, callable 2/15/2035.

AAA scales
MMD's scale was bumped five basis points two years and out: The one-year was at 2.61% (unch, no April roll) and 2.63% (-5, no April roll) in two years. The five-year was at 2.81% (-5, no April roll), the 10-year at 3.21% (-5, no April roll) and the 30-year at 4.19% (-5) at 3 p.m.

The ICE AAA yield curve was bumped five to seven basis points: 2.61% (-6) in 2026 and 2.63% (-6) in 2027. The five-year was at 2.80% (-7), the 10-year was at 3.18% (-6) and the 30-year was at 4.20% (-5) at 4 p.m.

The S&P Global Market Intelligence municipal curve was up to six basis points: The one-year was at 2.61% (unch) in 2025 and 2.62% (-6) in 2026. The five-year was at 2.82% (-6), the 10-year was at 3.20% (-5) and the 30-year yield was at 4.18% (-5) at 4 p.m.

Bloomberg BVAL was bumped three to four basis points: 2.51% (-3) in 2025 and 2.61% (-3) in 2026. The five-year at 2.81% (-4), the 10-year at 3.14% (-4) and the 30-year at 4.17% (-4) at 4 p.m.

Treasuries were slightly firmer.

The two-year UST was yielding 3.874% (-1), the three-year was at 3.859% (-2), the five-year at 3.921% (-3), the 10-year at 4.168% (-4), the 20-year at 4.56% (-4) and the 30-year at 4.526% (-5) near the close.

Primary to come
The California Educational Facilities Authority is set to price Thursday $600 million of University of Southern California revenue bonds, Series 2025A. Jefferies.

The J. Paul Getty Trust, California, (Aaa/AAA//) is set to price Thursday $500 million of taxable corporate CUSIPs, Series 2025A. Jefferies.

The San Francisco Public Utilities Commission (Aa2/AA-//) is set to price Wednesday $464.745 million of San Francisco water revenue refunding bonds, consisting of $377.76 million of green water and sewer improvement project bonds, Series 2025A, serials 2025-2047; $58.49 million of regional water and local water bonds, Series 2025B, serials 2025-2047; and $28.495 million of Hetch Hetchy water bonds, Series 2025C, serials 2025-2047. Jefferies.

Kansas City, Missouri, (/AA-/AA-/) is set to price Wednesday $274.7 million of special obligation bonds, consisting of $35.175 million of tax-exempt Series 2025B bonds, serials 2026-2055; $128.315 million of tax-exempt Series 2025C bonds, serials 2026-2040; and $111.21 million of taxable Series 2025 bonds, serials 2026-2027, 2035-2040. Stifel.

Austin, Texas, (A1/A+//AA-/) is set to price Wednesday $228.18 million of AMT airport system revenue refunding bonds, serials 2026-2044. Siebert Williams Shank.

Rochester, Minnesota, (Aa2/AA//) is set to price Wednesday on behalf of the Mayo Clinic $189.28 million of health care facilities revenue bonds, consisting of $97.915 million of Series 2025A, terms 2050, 2053, and $91.365 million of Series 2025B, term 2055. BofA Securities.

Cleveland, Ohio, (A2/A/A-/) is set to price Wednesday $125.525 million of non-AMT airport system revenue bonds, Series 2025A, serials 2026-2033.

The Matanuska-Susitna Borough, Alaska, (/AA+/AA+/) is set to price Wednesday $110.36 million of GOs, consisting of $31.97 million of school bonds, Series A; $47.815 million of school refunding bonds, Series B; $10.295 million of transportation system refunding bonds, Series C; and $20.28 million of taxable transportation system bonds, Series D. RBC Capital Markets.

The Agua Fria Union High School District No. 216, Arizona, (Aa1///) is set to price Thursday $100 million of school improvement bonds, projects of 2023 and 2024. Stifel.

Competitive
The Gwinnett County School District, Georgia, (Aaa/AAA//) is set to sell $332.67 million of GO refunding bonds at 11 a.m. Thursday.

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