Munis weakened further Wednesday, as U.S. Treasuries cheapened and equities ended lower.
Muni yields were cut by up to six basis points, depending on the scale. USTs cheapened by two to four basis points. The 10-year muni-to-UST ratio is now around 70%.
Chad Farrington, co-head of muni investment strategy at DWS, said the cuts in the muni market were driven by the UST losses earlier in the week. But they were also part of a "natural pullback," he said.
"We got to a rich place versus Treasuries," Farrington said. The strong technicals in the muni market may be starting to weaken — Monday was the first day to see fund outflows since April and bid lists out Wednesday morning were "more on the high yield side" — but it's too soon to know whether a trend is forming.
A buildup of supply in the coming weeks might weaken demand, Farrington said; this could be the start of "a good test for the market."
ICI data
The Investment Company Institute Wednesday reported inflows of $1.373 billion for the week ending July 15, following $1.375 billion of inflows the previous week.
Exchange-traded funds saw inflows of $935 million after $1.064 billion of inflows the week prior, per ICI data.
New-issue market
In the primary market Wednesday, Jefferies priced for the Texas Department of Housing and Community Affairs (Aa1/AA+//) $300 million of residential mortgage revenue bonds, Series 2026C, with the following priced at par — 2.75s of 1/2028, 2.85s of 7/2028, 3.05s of 1/2031, 3.15s of 7/2031, 3.9s of 1/2036, 4s of 7/2036, 4.375s of 7/2041, 4.75s of 7/2046, 4.875s of 2051 and 4.95s of 7/2056 — and 6.275s of 7/2057 at 3.86%, callable 1/2034.
Goldman Sachs priced for the Massachusetts Development Finance Agency (Aa3/AA-//) $165.875 million of Boston University revenue bonds, Series 2026C, with 5s of 10/2035 at 3.38%, 5s of 2036 at 3.45%, 5s of 2044 at 4.09% and 5s of 2045 at 4.16%, callable 10/2036, except for the 2035 bonds, callable 4/2035.
