Bond markets were quiet Tuesday ahead of
The two-year muni-UST ratio Tuesday was at 70%, the five-year at 65%, the 10-year at 68% and the 30-year at 91%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 66%, the 10-year at 68% and the 30-year at 89% at a 4 p.m. read.
October could be one of the strongest months for muni investors, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
While November and December are expected to remain positive, the final two months of the year may not match October's momentum and optimism, he said.
The softer-than-expected September consumer price index report, released Friday, reinforced confidence in the Fed's rate cut at its October meeting and potentially at its December meeting, Kozlik said.
"This inflation data is a key reason why the FOMC is likely to move lower, supporting continued strength in municipal demand," he said.
The VIX volatility index has remained below its 20-year average, signaling "unusually low market unpredictability," which, in turn, has reflected investor confidence and a more stable risk environment, both supportive of continued inflows, Kozlik said.
The surge in muni mutual fund and exchange-traded fund inflows, which total $45 billion year-to-date, has led to long-end strength, said Matt Fabian, president of Municipal Market Analytics.
"Funds have effectively repriced the long end that, for relative lack of institutional (and SMA) interest, had gapped out, widening the 2s/30s term spread to its highest since 1Q16," Fabian said, though he noted the recent peak is only average, if enough history is reviewed.
"To the extent inflation is resetting higher (assuming climate change is itself inflationary via [adoption] costs), steep term spreads may be required," he said.
Still, for now, Fabian said "fund-driven buying" has rallied fund NAV performance, with most non-high-yield strategies now seeing positive returns year-to-date — an "essential component" if inflows continue.
Fund NAVs have also benefited from a recent slowdown in supply — outside of last week's blockbuster pre-Fed week figure, he said.
MMA now estimates this year's issuance will be a record $561 billion. A previous MMA report estimated supply this year below $575 billion.
"Assuming that incremental issuance is being held back amid unprecedented headline risks via the federal government, more of what should have been issued this year will wash into next, reasonably pushing full year 2026 volume projections above $600 billion," Fabian said.
As issuance "cools," demand remains firm amid likely continued Fed rate cuts, Kozlik said.
"For investors, the window of opportunity is still open, but it may steadily narrow as supply tightens in the final months of the year," he said.
In the primary market Tuesday, BofA Securities priced for the Chicago Board of Education (/BB+//BBB-/) $1.095 billion of unlimited tax GO refunding bonds. The first tranche, $810.795 million of Series 2025B, saw 5.25s of 12/2027 at 4.33%, 5.25s of 2030 at 4.27%, 5.5s of 2035 at 4.70%, 5s of 2040 at 5.30% and 6s of 2044 at 5.54%, callable 12/1/2035.
The second tranche, $284.34 million of Series 2025C, saw 5.25s of 12/2027 at 4.33%, 5.25s of 2030 at 4.27%, 5.5s of 2035 at 4.70%, 6s of 2040 at 5.314% and 5.5s of 2045 at 5.70%, callable 12/1/2035.
BofA Securities priced for the Virginia Housing Development Authority (Aaa/AAA//) $450 million of commonwealth mortgage bonds. The first tranche, $75 million of non-AMT Series E bonds, saw all bonds price at par: 2.9s of 1/2027, 3s of 1/2030, 3.05s of 7/2030, 3.6s of 1/2035, 3.65s of 7/2035, 4.15s of 7/2040, 4.6s of 7/2045, 4.8s of 7/2050 and 4.875s of 7/2056, callable 1/1/2034.
The second tranche, $150 million of taxable Series F bonds, saw all bonds price at par: 3.6s of 1/2027, 3.185s of 1/2030, 3.865s of 7/2030, 4.737s of 1/2035, 4.787s of 7/2035, 5.337s of 7/2040, 5.552s of 7/2050 and 5.652s of 7/2056, callable 1/1/2034.
The third tranche, $225 million of non-AMT Series G bonds, saw 3.125s of 7/2056 price at par, callable 2/1/2026.
Morgan Stanley priced for Clemson University, South Carolina, (Aa2//AA/) $174.4 million of higher education revenue bonds, Series 2025A, with 5s of 5/2027 at 2.56%, 5s of 2030 at 2.53%, 5s of 2035 at 2.83%, 5s of 2040 at 3.42%, 5s of 2045 at 3.99%, 5s of 2050 at 4.28% and 5s of 2055 at 4.34%, callable 5/1/2035.
Jefferies priced for Broward County, Florida, (A1/A//) $132.765 million of AMT port facilities revenue bonds, Series 2025, with 5s of 9/2026 at 3.18%, 5s of 2030 at 3.16%, 5s of 2035 at 3.51%, 5s of 2040 at 4.02%, 5.25s of 2045 at 4.49%, 5.5s of 2050 at 4.64% and 5.5s of 2055 at 4.68%, callable 9/1/2035.
In the competitive market, the Florida Department of Transportation (Aa2/AA/AA/) sold $240.97 million of Florida Turnpike revenue bonds, to BofA Securities, with 5s of 7/2026 at 2.66%, 5s of 2030 at 2.45%, 5s of 2035 at 2.79%, 5s of 2040 at 3.39%, 4.125s of 2045 at 4.23%, 4.375s of 2050 at par, and 4.25s of 2055 at 4.43%, callable 7/1/2035.
AAA scales
MMD's scale was unchanged: 2.53% in 2026 and 2.44% in 2027. The five-year was 2.36%, the 10-year was 2.70% and the 30-year was 4.12% at 3 p.m.
The ICE AAA yield curve was little changed: 2.50% (unch) in 2026 and 2.42% (unch) in 2027. The five-year was at 2.39% (unch), the 10-year was at 2.73% (unch) and the 30-year was at 4.08% (-1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.52% (unch) in 2025 and 2.44% (unch) in 2026. The five-year was at 2.36% (unch), the 10-year was at 2.71% (-1) and the 30-year yield was at 4.09% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.49% in 2025 and 2.44% in 2026. The five-year at 2.34%, the 10-year at 2.69% and the 30-year at 4.03% at 4 p.m.
Treasuries were little changed.
The two-year UST was yielding 3.487% (-1), the three-year was at 3.493% (flat), the five-year at 3.605% (flat), the 10-year at 3.997% (flat), the 20-year at 4.521% (-1) and the 30-year at 4.547% (-1) near the close.
Primary to come
The Allen Independent School District, Texas, (Aaa/AAA//) is set to price Thursday $209.94 million of PSF-insured unlimited tax refunding bonds. FHN Financial.
The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price $200.48 million of taxable single-family mortgage Class I bonds, 2025 Series O-1. RBC Capital Markets.
The Harris County Cultural Education Facilities Finance Corp., Texas, (/AA//) is set to price Wednesday $200 million of Houston Methodist revenue bonds, Series 2025G. Jefferies.
The California Housing Finance Agency is set to price Wednesday $134.015 million of non-AMT sustainability affordable housing revenue bonds, 2025 Series B. RBC Capital Markets.
The River Islands Public Financing Authority Improvement Area No. 3, California, is set to price $112.375 million of Community Facilities District No. 2023-1 special tax bonds. HilltopSecurities.
Competitive
Florence, South Carolina, (Aa2/AA-//) is set to sell $143.645 million of combined waterworks and sewerage system capital improvement revenue bonds, at 11 a.m. Eastern Wednesday.
The Virginia Public School Authority is set to sell $104.75 million of special obligation school financing bonds at 10:45 a.m. Thursday.
