Municipals saw small cuts out long, as U.S. Treasuries were little changed and equities ended up.
The two-year muni-UST ratio Monday was at 63%, the five-year at 64%, the 10-year at 73% and the 30-year at 92%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 61%, the five-year at 66%, the 10-year at 72% and the 30-year at 92% at a 4 p.m. read.
"The muni market seemed to ignore Treasuries [last] week, marching to its own beat," said Birch Creek strategists.
"The benchmark AAA MMD curve saw yields lowered by 6-7 basis points up front and rose just 1bp out long, with all of the movement occurring on Monday and Tuesday," they said. "The main driver of the relative strength was the sizable July 1 reinvestment cash that was put to work this week."
New issuance continued its hefty pace with about $14 billion last week, Birch Creek said. Those deals "generally did well," though "some borrowers had a harder time gaining traction."
"For example, there were at least 15 different sizable Texas school district deals backed by their PSF insurance program, leading to several price cuts and widening as the week wore on," they said.
Issuance falls this week to about $9 billion, below the $11.8 billion weekly average since May, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
Supply, though, "hasn't missed a beat" this year overall, according to a report from First Eagle Investments.
"Issuance is anticipated to be on pace for another annual record as municipalities seek to fund increasingly expensive projects amid the waning glow of COVID-era federal stimulus and post-COVID tax windfalls," the report said.
For investors, the "healthy new-issue market" will provide "opportunities to enhance diversification and build scale within their portfolios," the report said. "In the secondary market, "rigorous credit analysis may uncover new municipal securities whose risk/reward profiles are particularly compelling."
Muni mutual funds saw inflows of $431.8 million last week, marking the 11th consecutive week of positive flows.
"Inflows are likely to continue recovering from the dislocations of 2022-23, fueled by high absolute and tax-equivalent yields," the First Eagle report noted.
The flows come despite munis being down 0.26% for the year, though month-to-date returns have managed to eke out gains of 0.08%, said Jason Wong, vice president of municipals at AmeriVet Securities.
"The front end of the curve is currently up 0.29%, while the long end (22-year-plus) continues to struggle with a loss of about 0.39%, bringing year-to-date losses in the long end to 3.75%," he said.
"We are in an interesting pocket of time, as since the start of the year, the front end has seen the best returns … seeing gains by an average of 289 basis points," Wong said. "However, 10-year munis are seeing a modest loss of 7.8 basis points while the long end is down by about 370 basis points."
Later this year, "we could see a potential rally," Wong said, pointing to the passage of the massive tax and spending bill — that once prompted fears for the muni tax exemption — and a potential rate cut from the Federal Reserve.
In the primary market Monday, J.P. Morgan priced for the Black Belt Energy Gas District (/A-//) $701.14 million of gas project revenue bonds, Series A, with 5s of 5/2027 at 4.36%, 5s of 2030 at 4.60% and 5s of 2032 at 4.85%, callable 2/1/2032.
AAA scales
MMD's scale was cut up to two basis points: The one-year was at 2.46% (unch) and 2.46% (unch) in two years. The five-year was at 2.55% (unch), the 10-year at 3.23% (+1) and the 30-year at 4.57% (+2) at 3 p.m.
The ICE AAA yield curve was narrowly mixed: 2.44% (-1) in 2026 and 2.39% (-1) in 2027. The five-year was at 2.62% (-1), the 10-year was at 3.21% (+1) and the 30-year was at 4.57% (+1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut up to two basis points: The one-year was at 2.46% (unch) in 2025 and 2.47% (unch) in 2026. The five-year was at 2.55% (unch), the 10-year was at 3.23% (+2) and the 30-year yield was at 4.55% (+1) at 4 p.m.
Bloomberg BVAL was cut up to two basis points: 2.48% (unch) in 2025 and 2.50% (unch) in 2026. The five-year at 2.61% (unch), the 10-year at 3.17% (+1) and the 30-year at 4.56% (+2) at 4 p.m.
Treasuries were little changed.
The two-year UST was yielding 3.897% (+1), the three-year was at 3.886% (+1), the five-year at 3.981% (+1), the 10-year at 4.424% (+1), the 20-year at 4.961% (+1) and the 30-year at 4.968% (+2) just before the close.
Primary to come
The New York State Transportation Development Corp. (Baa3/NR/BBB-/BBB-) is set to price Wednesday $1.367 billion special facilities revenue bonds (Kennedy Airport New Terminal One Project). Serials, terms. BofA.
Honolulu (/AA+//) is set to price Wednesday $695 million GOs. Serials. BofA.
Salt Lake City (A1/A+/NR/AA) is set to price Thursday $608.6 million airport revenue bonds. Serials, terms. JPMorgan.
The Utah Transit Authority (Aa2/AA+/AA/) is set to price Wednesday $450 million sales tax revenue and refunding bonds. Serials, terms. JPMorgan.
The New York State Environmental Facilities Corp. (Aaa/AAA/AAA/) is set to price Tuesday $369.97 million clean water revolving fund revenue refunding bonds. Serials, terms. BofA.
Dripping Springs Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $328 million PSF-backed unlimited tax school building bonds. Serials. Raymond James.
Carrollton-Farmers Branch ISD, Texas, (Aaa/AAA//), is set to price Wednesday $307.9 million PSF-backed unlimited tax school building bonds. Serials. BOK Financial.
The New Hampshire Municipal Bond Bank (Aa2/AA+//) is set to price Tuesday $232 million GOs. Serials, terms. Raymond James.
The San Jose USD (Aaa/AAA//) is set to price Wednesday $219 million GOs. Serials. Stifel, Nicolaus.
Irving ISD, Texas, (Aaa/AAA//) is set to price Tuesday $214.98 million PSF-backed unlimited tax school building bonds. Serials. BOK Financial.
The Wisconsin Public Finance Authority (NR/A/A+/NR) is set to price Wednesday $194.38 million hospital revenue bonds (Renown Regional Medical Center Project). Serials, terms. Barclays.
The Wisconsin Public Finance Authority (NR/NR/NR/NR) is set to price $175 million tax-exempt pooled securities. JPMorgan.
Red Oak ISD, Texas, (Aaa///) is set to price Tuesday $172.44 million PSF-backed unlimited tax school building bonds. Serials, terms. Baird.
The California Statewide Communities Development Authority is set to price Wednesday $151.98 million Cal-Mortgage Loan insured revenue and refunding bonds (Sequoia Living Project). Ziegler.
The Wisconsin Public Finance Authority is set to price Thursday $150 million municipal certificates (Cuyahoga River Capital Portfolio). HilltopSecurities.
Capital Impact Partners, D.C., (/A+/A+/) is set to price Tuesday $150 million taxable bonds. Mesirow.
Charlotte, North Carolina, (Aaa/AAA//) is set to price Thursday $145.86 million water and sewer system refunding revenue bonds. Serials. BofA.
The Rhode Island Housing and Mortgage Finance Corp. (Aa1/AA+/NR/NR) is set to price Thursday $133.7 million homeownership opportunity bonds. JPMorgan.
The Grapevine-Colleyvill ISD, Texas, is set to price Tuesday $126 million unlimited tax refunding bonds. Piper Sandler.
The Ohio Housing Finance Agency (Aa1///) is set to price Thursday $125 million residential mortgage revenue bonds (social bonds). Serials, terms. BofA.
Clarkston Community Schools, Michigan, (Aa1///) is set to price Tuesday $122.725 million School Bond Qualification and Loan Program-backed GOs. Serials. Huntington Securities.
Anne Arundel County, Maryland, (Aaa/AAA/AAA/NR) is set to price Tuesday $107.49 million GOs. Serials. BofA.
King County Housing Authority, Washington, is set to price Wednesday $102 million pooled housing refunding revenue bonds. Serials, terms. KeyBanc.
Competitive
Rochester, New York, is set to sell $171 million bond anticipation notes Wednesday at 11 a.m., Eastern.
Glendale, California, is set to sell $166.98 million electric revenue bonds Tuesday at 11 a.m., Eastern.
Rutherford County, Tennessee, is set to sell $108 million GO school bonds Tuesday at 10:30 a.m., Eastern.
The North Syracuse Central School District, New York, is set to sell $106.637 million bond anticipation notes Thursday at 11 a.m., Eastern.
Wakefield, Massachusetts, is set to sell $106 million GOs Thursday at 11 a.m., Eastern.
The Longview Independent School District, Texas, is set to sell $101 million PSF-backed unlimited tax school building bonds Tuesday at 11 a.m., Eastern.
