Munis were a tad firmer out long, while U.S. Treasury yields edged slightly higher and equities ended up.
The two-year muni-UST ratio Wednesday was at 59%, the five-year at 59%, the 10-year at 62% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 59%, the five-year at 58%, the 10-year at 62% and the 30-year at 89%, according to ICE Data Services.
The Investment Company Institute Wednesday reported inflows of $1.938 billion for the week ending Feb. 18, following $2.784 billion of inflows the previous week.
Exchange-traded funds saw inflows of $55 million after $841 million of inflows the week prior, per ICI data.
Muni investors — including separately managed accounts running longer total return rate strategies, exchange-traded funds and lately traditional mutual funds — have "recognized the nominal and relative value in longer maturities," said Matt Fabian, president of Municipal Market Analytics
"While front-end ratios are rich and getting richer amid automated [first quarter] ladder replenishments, the 30-year has floated up ... to attract wayward and, until recently, sparse institutional dollars for still solid new issue supply," he said.
The widening of the ratio curve shows something similar to the second quarter of 2025, when "ETF and other institutional money began to emerge for cheap long-end paper, supporting prices," Fabian said.
Fund returns — which have been positive during all of this — create momentum for its continuation in the near term, he said.
So even as SMA activity has "faltered" lately, including because of Presidents Day, aggregate demand appears more than competent for available supply, Fabian said.
"That is, at least for now; tax season and thinning reinvestment demand over the next month or so may well force yields higher," he said.
Elsewhere, there is a positive view of the muni market in the long-term due to a mix of attractive tax-adjusted yields and a generally favorable credit backdrop, said Cooper Howard, director of fixed income research and strategy at Charles Schwab.
Investment-grade munis are seeing positive returns of 0.99% month-to-date and 1.94% year-to-date. High-yield munis saw gains of 1.35% month-to-date and 2.34% year-to-date.
Taxable munis are seeing gains of 1.94% MTD and 1.99% YTD.
Munis are expected to see gains this year, but Howard notes he would be unsurprised if the pace slows.
Historically, the muni market has "performed well" at the beginning of the year because of a mismatch between supply and demand, he said.
"Many municipal bonds pay interest and principal that comes due in December and that money is often reinvested in January," Howard said, noting the strong demand pushes prices higher and is supportive of total returns.
However, returns could struggle relative to comparable bonds due to low relative valuations and seasonal factors, according to Howard.
Additionally, "a further breakdown between the relationship between the federal governments and state and locals could lead to headline risk," he said.
The risks of changes to federal policy — which will continue to linger — are more of a headline risk to the whole market than a credit risk, Howard said.
New-issue market
In the primary market Wednesday, J.P. Morgan preliminarily priced for the Regents of the University of California (Aa2/AA/AA/) $1.974 billion of general revenue bonds. The first tranche, $985.59 million of Series 2026CE, saw 5s of 11/2026 at 1.96%, 5s of 2031 at 2.10%, 5s of 2036 at 2.60%, 5s of 2041 at 3.23% and 5s of 2045 at 3.78%, callable 5/15/2036.
The second tranche, $988.86 million of Series CF, saw 5s of 11/2026 at 1.96%, 5s of 2031 at 2.10%, 5s of 2036 at 2.60%, 5.25s of 2041 at 3.18% and 5s of 2046 at 3.92%, callable 5/15/2036.
Siebert Williams Shank preliminarily priced for the Pennsylvania Turnpike Commission (Aa3/AA-/AA-/AA-/) $670.74 million of turnpike revenue bonds. The first tranche, $292.835 million of Series A of 2026 bonds, saw 5s of 12/2027 at 2.13%, 5s of 2031 at 2.30%, 5s of 2036 at 2.82%, 5s of 2041 at 3.36%, 5s of 2046 at 4.10%, 5s of 2051 at 4.40% and 5s of 2056 at 4.52%, callable 6/1/2036.
The second tranche, $377.905 million of First Series of 2026 refunding bonds, saw 5s of 12/2027 at 2.13%, 5s of 2031 at 2.30%, 5s of 2036 at 2.82%, 5s of 2041 at 3.36% and 5s of 2042 at 3.49%, callable 6/1/2036.
BofA Securities priced for Fairfax County, Virginia, (Aaa/AAA/AAA/) $217.55 million of public improvement refunding bonds, Series 2026B, with 5s of 10/2026 at 2.09% and 5s of 2030 at 2.11%, noncall.
In the competitive market, Oyster Bay, New York, sold $148 million of water district notes to BofA Securities, with 4s of 3/2027 at 2.20%, noncall.
The Virginia Commonwealth Transportation Board (Aa1/AA+/AA+/) sold $118.96 million of transportation capital projects revenue refunding bonds, to J.P. Morgan, with 5s of 5/2027 at 2.08%, 5s of 2031 at 2.16%, 5s of 2036 at 2.62%, and 5s of 2037 at 2.74%, noncall.
The Board of Trustees of the University of Illinois (Aa2/AA//) sold $113.06 million of auxiliary facilities system refunding revenue bonds, Series 2026A, to J.P. Morgan, with 5s of 4/2027 at 2.13%, 5s of 2031 at 2.23%, 5s of 2036 at 2.75%, 5s of 2041 at 3.38% and 5s of 2042 at 3.51%, callable 4/1/2036.
Franklin, Tennessee, (Aaa/AAA//) sold $105.69 million of GOs to Truist, with 5s of 3/2027 at 2.12%, 5s of 2031 at 2.18%, 5s of 2036 at 2.58%, 5s of 2041 at 3.15%, 5s of 2046 at 3.91% and 5s of 2051 at 4.16%, callable 3/1/2036.
AAA scales
MMD's scale saw small bumps in spots: 2.03% (-2) in 2027 and 2.05% (unch) in 2028. The five-year was 2.12% (unch), the 10-year was 2.52% (unch) and the 30-year was 4.20% (-2) at 3 p.m.
The ICE AAA yield curve was bumped up to two basis points: 2.04% (-2) in 2027 and 2.05% (unch) in 2028. The five-year was at 2.11% (unch), the 10-year was at 2.51% (unch) and the 30-year was at 4.18% (-1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.04% (-1) in 2027 and 2.06% (unch) in 2028. The five-year was at 2.12% (unch), the 10-year was at 2.51% (unch) and the 30-year yield was at 4.19% (-1) at 3 p.m.
Bloomberg BVAL was bumped up to one basis point: 2.05% (unch) in 2027 and 2.04% (unch) in 2028. The five-year at 2.09% (unch), the 10-year at 2.49% (unch) and the 30-year at 4.07% (-1) at 4 p.m.
U.S. Treasuries saw small losses.
The two-year UST was yielding 3.47% (+1), the three-year was at 3.484% (+2), the five-year at 3.616% (+2), the 10-year at 4.047% (+2), the 20-year at 4.636% (+1) and the 30-year at 4.692% (+1) near the close.
Primary to come
Lee County, Florida, (A2//A/AA-/) is set to price Thursday $681.315 million of airport revenue bonds, consisting of $464.145 million of Series 2026A-1 AMT bonds, $169.85 million of Series 2026-A2 AMT bonds and $47.32 million of Series 2026B non-AMT refunding bonds. BofA Securities.
The Public Finance Authority (//A-/) is set to price $132.385 million of tax-exempt revenue bonds, Series 2026 (Maniilaq Association Employee Housing Project). Goldman Sachs.
Competitive
The Santa Clara County Financing Authority, California, (/AA+/AA+/) is set to sell $400 million of lease revenue bonds, 2026 Series A, at 11:30 a.m. Eastern Thursday.
The Clark County School District, Nevada, (A1/AA-//) is set to sell $300.145 million of GO building and refunding bonds, Series 2026A, at 11:30 a.m. Thursday.
Hoboken, New Jersey, is set to sell $193.441 million of bond anticipation notes of 2026, Series A, at 11:00 a.m. Thursday.
