Munis were weaker on Tuesday, as U.S. Treasuries richened slightly and equities ended higher.
Muni yields cheapened by up to four basis points, depending on the scale, with the biggest losses on the long end of the curve. UST yields were firmer up to two basis points.
The muni and UST markets are both in a period of consolidation after Treasuries became very oversold, according to Chris Brigati, managing director and CIO at SWBC.
Although munis rallied last week, there's considerable risk that they will sell off again, Brigati said, as the new-issue calendar shows heavy supply, and USTs could weaken further. He expects the 10-year muni-to-UST ratio to return to its recent high of 80% within the next two weeks.
In this environment, traders and buyers should have different mindsets, Brigati said. It makes sense for buyers to take advantage of the best yields from the last 20 years, he said, because they could buy more if yields cheapen further.
"Yields are cheap," Brigati said. "As a trader, I worry they could get cheaper. As an investor, I think, 'Wow, these are really attractive levels.' I want to make sure people ... start to at least lock in some of this. It's generationally attractive."
New-issue market
In the primary market Tuesday, BofA priced for California (Aa2/AA-/AA/) $1.74 billion of various purpose general obligation bonds. The first tranche, $898.11 million, saw 5s of 8/2029 at 3.52%, 5s of 2037 at 4.12%, 5s of 2041 at 4.60%, 5.25s of 2047 at 4.95%, 5.25s of 2051 at 5.04%, 5s of 2051 at 5.09%, 5.5s of 2054 at 5.01% and 5s of 2054 at 5.12%, callable 8/2036.
The second tranche, $845.77 million of refunding GOs, saw 5s of 2/2027 at 3.39%, 5s of 8/2027 at 3.39%, 5s of 8/2030 at 3.57% and 5s of 8/2036 at 4.04%, noncall.
J.P. Morgan priced for the San Diego Unified School District (Aa2//AAA/AAA/) $795 million of GOs. The first tranche, $4 million of taxable election of 2008 bonds, Series Q-1, saw 4.5s of 1/2027 priced at par, noncall.
The second tranche, $121 million of election of 2008 bonds, Series Q-2, saw 5s of 7/2027 at 3.17%, 5s of 2034 at 3.50%, 5s of 2036 at 3.68%, 5s of 2041 at 4.36% and 5s of 2046 at 4.81%, callable 7/2036.
The third tranche, $350 million of election of 2018 bonds, Series J-2, saw 5s of 7/2027 at 3.17%, 5s of 2056 at 5.16% and 5.5s of 2056 at 5.11%, callable 7/2036.
The fourth tranche, $320 million of election of 2022 bonds, Series D-2, saw 5s of 7/2027 at 3.17%, 5s of 2051 at 5.05%, 5s of 2056 at 5.16% and 5.5s of 2056 at 5.11%, callable 7/2036.
In the competitive market, Clark County School District, Nevada, (A1/AA-//) sold to BofA Securities $400 million of limited tax GO building bonds, Series 2026C, with 5s of 6/2027 at 3.58%, 5s of 2031 at 3.85%, 5s of 2036 at 4.28%, 5s of 2041 at 4.89% and 5s of 2046 at 5.18%, with maturities from 2042-2046 insured by Assured, callable 6/2036.
