Municipals were stronger Wednesday while U.S. Treasuries and equities were mixed as data showed the U.S. economy shrank in the first quarter and the volatile month of April came to a close.
With gross domestic product for the first quarter coming in at -0.3%, ING Chief International Economist James Knightley said additionally, price metrics were concerning. "The price metrics were firmer than anticipated, suggesting a bit more stickiness in inflation than thought ahead of what are likely to be tariff and supply disruption-induced price hikes later in the year."
This will let the stagflation discussion continue dominating economic debate Knightley said.
Consumers are likely to pull back as a result of rising prices, possible job losses and declining wealth, he said.
"With the inflation backdrop limiting what the Fed can do to help in the near term there appears to be little prospect of imminent interest rate cuts," Knightley added, noting he expects no cuts until the third quarter, when "we suspect they will move hard and fast and fully understand why markets now pricing 100bp of interest rates cuts for the year versus 79bp this time last week."
Municipal triple-A yield curves saw yields fall one to six basis points depending on the curve.
The two-year ratio Wednesday was at 81%, the five-year at 80%, the 10-year at 80% and the 30-year at 94%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 78%, the five-year at 79%, the 10-year at 79% and the 30-year at 94% at 4 p.m.
The Investment Company Institute reported large outflows for the week ending April 16: $3.405 billion, following $3.714 billion of outflows the previous week.
Exchange-traded funds saw inflows of $1.078 billion after $1.402 billion of outflows the week prior, per ICI data.
Looking back at the past month, April "has almost felt like two months in one, separated by the pre-tariff/post-tariff cycle," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital. "A constructive tone has taken hold at month's end, following what was near-historic volatility in the first week of April."
The market is coming out of oversold conditions, said David Litvack, a tax-exempt strategist at BofA.
"There was a lot of weakness in the municipal market versus other fixed income sectors year-to-date," both technical and fundamental in nature, he said.
Technical factors included heavy issuance, low redemptions, and pre-tax day-based selling, Litvack said. However, now that the market has passed the tax day, pre-tax , sales have ceased, and higher redemptions are scheduled for May.
And on the fundamental side, the markets have settled down, he said.
"Risk assets are rallying, and the market volatility with relation to tariffs and other economic concerns seems to be giving way to a more bullish sentiment, a response sentiment that favors munis," Litvack said.
"The strength that has developed in recent sessions speaks to the market's resiliency and varied buyer segments — some of whom are consistently engaged and others who access the market when spreads and/or yields widen out," Olsan said. "Another supportive component has been a steadier U.S. Treasury tone, where the 10-year yield is set to close exactly where the month opened (4.17% but with a wide 50-basis point intra-month swing)."
"Between competitive and negotiated new issues, the theme was quality was worth bidding up," Olsan said.
"A benchmark-name sale of Delaware GOs drew winning yields as wide as 10 basis points through indicative AAA spots, and Shelby County, Tennessee, (AA-rated general market name) was paid single-digit spreads in the first 10 years of the scale on its GO issue," she said.
Firmer levels, though, are not just for high grades, Olsan noted.
"A sale of A1/AA- Dallas-Fort Worth Airport 5s due 2032 at 3.41% was spread just +16/MMD—not that far off where Texas PSF-backed AAA school names will trade," she said.
Despite the recent price gains, munis were on track to lose about 1% for the month, with sectors such as high-yield set to finish down about 2%, Olsan said.
While April
The dip in issuance comes after a record year of supply at over $500 billion, and the market is still on track for another record year. Bond Buyer 30-day visible supply sits at $19.09 billion.
New issue market
It was another busy day in the new-issue market Wednesday.
Wells Fargo accelerated and downsized a deal for the East Bay Municipal Utility District, California, (Aaa/AAA//) with $741.130 million (down from $1.095 billion) of water system revenue bonds. The first series, $260.845 million of green Series 2025A bonds, saw 5s of 6/2040 at 3.79%, 5s of 2045 at 4.20%, 5s of 2050 at 4.38% and 5s of 2055 at 4.45%, callable 5/1/2035. The second series, $480.285 million of Series 2025B refunding bonds, saw 5s of 2026 at 2.74%, 5s of 2030 at 2.87%, 5s of 2035 at 3.27%, 5s of 2040 at 3.79%, 5s of 2045 at 4.20%, callable 6/1/2035.
RBC Capital Markets priced $671.22 million of hospital facilities revenue bonds, Series 2025A, for Bon Secours Mercy Health, Inc. (A1/A+/AA-/). A total of $311.315 million was sold through Allen County, Ohio, priced as 5s to yield 3.82% in 11/2033 to 4.58% in 11/2041.
In addition, $94.705 million was sold through the South Carolina Jobs-Economic Development Authority priced as 5.25s to yield 4.63% in 11/2042 through 4.76% in 11/2044.
Another $265.2 million was sold through the Economic Development Authority of Henrico County, Virginia, priced as 5s to yield 3.98% in 11/2035 and 4.97% in 11/2048.
Separately, $198.44 million of Series 2025B bonds were issued through the South Carolina Jobs-Economic Development Authority. That deal included $99.64 million priced as 5s to yield 3.84% in 11/2055 and $98.8 million priced as 5s to yield 3.97% in 11/2049.
BofA Securities priced $271.215 million of State of Oregon higher education general obligation bonds (Aa1/AA+/AA+). The deal included $195.085 million Series G bonds priced as 5s of 8/2026 at 3.04%, 5s of 8/2030 at 3.17%, 5s of 8/2035 at 3.51%, 5s of 8/2040 at 3.96%, 5s of 8/2045 at 4.29%, and 5s of 8/2050 at 4.46%.
The deal also included $76.13 million Series F bonds priced as 5s of 8/2026 at 3.04%, 5s of 8/2030 at 3.17%, 5s of 2/2035 at 3.51%, 5s of 8/2040 at 3.96%, and 5s of 8/2045 at 4.29%.
RBC Capital Markets priced $200 million of Tennessee Housing Development Agency residential finance program bonds (Aa1/AA+) priced at par to yield 3.45% in 1/2026, 3.9% in 1/2030, 4.4% in 1/2035, 4.625% in 7/2040, 4.90% in 7/2045, 5% in 7/2050, 5.05% in 7/2055, and 6.0% in 1/2056.
The deal also included $50 million of taxable bonds priced at par to yield 4.402% in 7/2026, 4.52% in 7/2030, 5.348% in 7/2035, 5.638% in 7/2040, 5.893% in 7/2045, 5.953% in 7/2050, 5.993% in 7/2055, and 6.5% in 1/2056.
Piper Sandler & Co. priced $113 million of Series B general obligation bonds for the Modesto High School District, California (Aa2) with 5s of 8/2026 at 3.00%, 5s of 1/2030 at 3.07%, 5s of 8/2035 at 3.45%, 5s pf 8/2040 at 3.87%, 5s of 8/2045 at 4.28%, 5.25s of 8/2050 at 4.45%, and 4.5s of 8/2052 at 4.65%.
Piper Sandler & Co. also priced $30 million of Series A general obligation bonds for the Modesto City Elementary School District, California, (Aa3) as 5s of 8/2026 at 3.08%, 5s of 8/2036 at 3.68%, 5s of 8/2040 at 3.97%, 5s of 8/2045 at 4.38%, 5.25s of 8/2050 at 4.54%, and 4.5s of 8/2054 at 4.72%.
Raymond James & Associates priced $100 million of single-family mortgage revenue bonds for the Oklahoma Housing Finance Agency (Aaa) priced at par to yield 3.50% in 3/2026, 3.95% in 3/2030, 4.40% in 3/2035, 4.65% in 2040, 4.875% in 9/2045, 5.0% in 3/2049, and 6.5% in 9/2056.
AAA scales
MMD's scale was bumped up to two basis points: The one-year was at 2.89% (unch) and 2.92% (unch) in two years. The five-year was at 3.02% (-2), the 10-year at 3.34% (-2) and the 30-year at 4.38% (-2) at 3 p.m.
The ICE AAA yield curve was bumped three to six basis points: 2.87% (-3) in 2026 and 2.88% (-3) in 2027. The five-year was at 2.98% (-3), the 10-year was at 3.29% (-5) and the 30-year was at 4.36% (-6) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped one to three basis points: The one-year was at 2.89% (-2) in 2025 and 2.92% (-1) in 2026. The five-year was at 3.02% (-3), the 10-year was at 3.34% (-3) and the 30-year yield was at 4.38% (-2) at 4 p.m.
Bloomberg BVAL was bumped one to three basis points: 2.85% (-1) in 2025 and 2.90% (-1) in 2026. The five-year at 3.03% (-2), the 10-year at 3.34% (-3) and the 30-year at 4.39% (-2) at 4 p.m.
Treasuries improved on the short end but saw losses out long.
GDP
First quarter gross domestic product was negative as firms built inventories before tariffs could be implemented, yet analysts had various takes on the report.
"Companies got ahead of possible tariffs by building inventories just as they are now likely getting ahead of a possible policy-driven recession by reducing hiring and investment," said Peter Graf, chief investment officer at Nikko Asset Management Americas.
Price data suggests nominal growth was near the pace of recent quarters, he said.
"With few signs of a slowdown in core activity or price growth, this report is unlikely to motivate the Trump administration to accelerate de-escalation, or to give the Fed pause about keeping rate cuts paused," Graf said.
Ameriprise Chief Economist Russell Price said consumer spending was "fairly solid" in the quarter, but was dragged down by auto sales, hurt by bad January weather.
Still, near-term economic growth will slow, he said, but "should see a material bounce" in the second quarter, with fewer imports.
"Higher prices are likely to weigh on consumer and business spending in the second half of the year, but the uncertain tariff picture still clouds that outlook," Price said.
The report won't impact Fed thinking, he said. "Right now, the market, based on fed fund futures, is looking for four quarter-point rate cuts this year. We believe that might be a little aggressive and three might be more appropriate," Price added.
"The same trade distortions rocking Q1 GDP will work in the opposite way in Q2, significantly reducing the odds of back-to-back GDP declines," said Chris Low, chief economist at FHN Financial. "Most [trade partners] are just sitting, waiting for the trade deadlock to break."
Looking past the headline, inflation data was higher than forecast, noted Olu Sonola, head of U.S. economic research at Fitch Ratings. "The frontrunning of purchases by consumers and businesses ahead of expected tariffs will make the data noisy for a few months."
This should keep Fed on the sidelines, he said. "They will likely continue their wait-and-see approach to assess the inflation shocks stemming from the tariffs announced in April."
And while "businesses front-running the tariffs" may have distorted this read, Richard Flax, Moneyfarm chief investment officer, notes "a significant growth slowdown is now forecast for the rest of 2025 and well into 2026, should the trade barriers remain. This result will likely raise the probability of a recession in the U.S. over the next 12 months."
But the numbers were "better than feared, considering special factors," noted Wells Fargo Investment Institute, and "likely overstated the extent of the first-quarter slowdown."
Sal Guatieri, BMO senior economist, agreed. "Tariff front-running and DOGE-led cuts explain much of the economy's rough start to the year. But, weaker exports and intense uncertainty will hold the economy back in the next couple of quarters. Once the Fed gets more clarity on the situation, it will likely address the economy's weakness by resuming rate cuts in July."
Primary to come
The District of Columbia (Aa1/AAA//) is set to price Thursday $1.491 billion of income tax secured revenue bonds, consisting of $1.19 billion of tax-exempt refunding bonds, Series 2025A, serials 2026-2045, term 2050, and $301.08 million of taxables, Series 2025B, serials 2026-2040, terms 2045, 2050. Wells Fargo.
The Los Angeles Department of Water and Power (Aa2//AA-/AA-/) is set to price Thursday $993.525 million of power system revenue bonds, 2025 Series A. Barclays.
The Black Belt Energy Gas District (/A-//) is set to price Thursday $659.2 million of gas project revenue bonds, 2025 Series A, serials 2027-2032, 2055. J.P. Morgan.
The Build NYC Resource Corp. (/BBB+//) is set to price Thursday $196 million of TRIPS Obligated Group senior airport facilities revenue bonds. J.P. Morgan.
The Denver Health and Hospital Authority, Colorado, (/BBB/BBB/) is set to price Thursday $116.37 million of healthcare revenue refunding bonds, Series 2025A, terms 2045, 2050, 2055. Piper Sandler.
Gary Siegel contributed to this story.
