Municipals are weaker out long to open December as U.S. Treasuries cheapened and equities ended down.
Muni yields were cut up to three basis points, while UST yields rose five to nine basis points.
The two-year muni-UST ratio Monday was at 69%, the five-year at 66%, the 10-year at 67% and the 30-year at 88%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 70%, the five-year at 67%, the 10-year at 69% and the 30-year at 88% at a 3 p.m. read.
The muni market recorded its fourth straight month of positive returns in November and December is likely to keep the streak going with another strong month to round out the year.
Investment-grade munis saw gains of 0.23% in November and 4.15% year-to-date. High-yield munis saw returns of 0.39% last month and 2.71% YTD.
Taxable munis saw gains of 0.64% in November and 8.27% YTD.
Jason Wong, vice president of municipals at AmeriVet Securities, is expecting another "strong rally" in December, as the final month of the year "typically sees a rally, with just one negative performance in the last 10 years."
The reason for his optimism is the "typically light calendar" of new issues, the fourth smallest month of the year, which "should fuel a rally for secondary demand as investors look to tax-loss swapping to wrap up for the year."
November issuance totaled $38.487 billion, up 51.1% year-over-year. Issuance year-to-date is $535.15 billion, up 11.5% from $479.829 billion over the same period in 2024. This officially tops 2024's record $507.585 billion volume.
New issue supply is expected to persist at record levels, but that should be "comfortably absorbed" by the market, Lind Capital Partners says in its latest Municipal Market Commentary.
"Signs of a weakening labor market and declining consumer confidence ultimately renewed conviction in a December rate cut," which should boost the market and help absorb supply, Lind said. "Combined with holiday-driven investor complacency (that) should make for a fun month."
Munis finished flat in November and underperformed Treasuries across the curve, Wong said.
The two-year muni-UST ratio ended the month at 71.15%, compared to 69.51% at the start of the month, while the five-year ratio closed the month at 67.50% versus 65.02% at the end of October.
The 10-year ratio climbed to 68.51% from 67.02%. The 30-year maturity was the best performer, with the ratio to comparable Treasuries rising by only 0.2 percentage points to 88.49%.
The average yield on 10-year muni bonds ended the month at 2.71%, unchanged from October.
The muni curve held steady at 163 basis points for the week and the month.
Although the seven-week muni mutual fund inflow streak ended in November, flows remained "firmly positive" last month, totaling $1.25 billion, Lind said.
Investors added $679.5 million to municipal bond mutual funds in the week ended Wednesday, following $905.8 million of outflows the prior week, according to LSEG Lipper data.
High-yield funds saw small inflows of $97 million compared to outflows of $142.1 million the previous week.
However, the firm noted that fund flow data has been "distorted" lately by several recent conversions of muni bond mutual funds to exchange-traded funds whose assets "continue to set annual records, as the structure remains in vogue."
AAA scales
MMD's scale was cut out long: 2.50% (unch, no Dec. roll) in 2026 and 2.44% (unch, no Dec. roll) in 2027. The five-year was 2.41% (unch, no Dec. roll), the 10-year was 2.75% (unch, no Dec. roll) and the 30-year was 4.19% (+3) at 3 p.m.
The ICE AAA yield curve was cut two to three basis points: 2.49% (+2) in 2026 and 2.47% (+2) in 2027. The five-year was at 2.43% (+3), the 10-year was at 2.77% (+3) and the 30-year was at 4.13% (+3) at 3 p.m.
The S&P Global Market Intelligence municipal curve was cut out long: The one-year was at 2.50% (unch) in 2025 and 2.44% (unch) in 2026. The five-year was at 2.40% (unch), the 10-year was at 2.75% (unch) and the 30-year yield was at 4.16% (+3) at 3 p.m.
Bloomberg BVAL was cut up to three basis points: 2.50% (unch) in 2025 and 2.46% (unch) in 2026. The five-year at 2.39% (unch), the 10-year at 2.73% (+1) and the 30-year at 4.08% (+3) at 3 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.538% (+5), the three-year was at 3.552% (+7), the five-year at 3.672% (+8), the 10-year at 4.095% (+8), the 20-year at 4.714% (+9) and the 30-year at 4.746% (+8) at 3 p.m.
Primary to come
Connecticut (Aa2/AA/AA/AAA/) is set to price Wednesday $1.56 billion of transportation infrastructure purposes special tax obligation refunding bonds, Series 2025A. Raymond James.
The Utility Debt Securitization Authority, New York, (Aaa/AAA/AAA/) is set to price Thursday $1.026 billion of restructuring bonds, consisting of $112.03 million of Series 2025 green bonds and $914.275 million of Series 2025 TE-2 bonds. BofA Securities.
Massachusetts (Aa1/AA+/AA+/) is set to price Wednesday $1.019 billion of GOs, consisting of $750 million of Series 2025G bonds and $269.585 million of Series 2025B refunding bonds. BofA Securities.
The California Community Choice Financing Authority (Aa1///) is set to price $950 million of green clean energy project revenue bonds, Series 2025G. Goldman Sachs.
The San Francisco Airport Commission (Aa3/AA-//) is set to price Tuesday $930.28 million of San Francisco International Airport second series revenue bonds, consisting of $874.645 million of Series 2025D bonds and $55.635 million of Series 2025E bonds. J.P. Morgan Securities.
The Battery Park City Authority (Aaa//AAA/) is set to price Wednesday $662.285 million of senior revenue sustainability refunding bonds, RBC Capital Markets.
CPS Energy (Aa2/AA-/AA-/) is set to price Thursday $599.765 million of revenue refunding bonds, New Series 2026A. Jefferies.
The Maryland Health and Higher Educational Facilities Authority (Aa2/AA-/AA-/) is set to price Wednesday $335.115 million of revenue bonds (The Johns Hopkins Health System Issue), Series 2025A. J.P. Morgan.
Oakland (Aa2/AA-//) is set to price Wednesday $333.99 million of Measure U GO bonds, consisting of $94.26 million of tax-exempt Series 2025B-1 bonds, $48.94 million of tax-exempt Series 2025 Refunding bonds, $180.745 million of taxable Series 2025B-2 bonds, and $10.045 million of taxable Series 2025B-3 bonds.
Pasadena Unified School District (Aa3///) is set to price Tuesday $300 million of GOs, consisting of $250 million of Election of 2020 Series D bonds, and $50 million of 2024 Election Series 2025A bonds. Raymond James.
The Oklahoma Water Resources Board (/AAA//) is set to price Thursday $261.81 million of state loan program revenue bonds, Series 2025C. BOK Financial Securities.
The Monroe County Industrial Development Corp. (Aa3/AA-//) is set to price Tuesday $223.215 million of University of Rochester project bonds, consisting of $122.445 million of non-AMT Series 2025A bonds and $100.77 million of taxable Series 2025B bonds. BofA Securities.
The Pennsylvania Turnpike Commission (A1/AA-/AA-/) is set to price Wednesday $206.595 million of motor vehicle registration fee revenue bonds, Series 2025. BofA Securities.
The Georgia Housing and Finance Authority (/AAA//) is set to price Tuesday $205.065 million of non-AMT single-family mortgage bonds, Series 2025G. Morgan Stanley.
The North Dakota Housing Finance Agency (Aa1///) is set to price Wednesday $185 million of non-AMT housing finance program social bonds (Home Mortgage Finance Program), Series 2025C. RBC Capital Markets.
Ohio (Aa1/AA+/AA+/) is set to price Wednesday $173.82 million of tax-exempt capital facilities lease-appropriation bonds, consisting of $89.59 million of mental health facilities improvement fund projects, Series 2025A; $58.055 million of parks and recreation improvement fund projects refunding bonds, Series 2025A; and $26.175 million of adult correctional building fund projects refunding bonds, Series 2025C. Jefferies.
The Summit County Development Finance Authority (/AA//) is set to price Wednesday $157.595 million of BAM-insured student housing revenue bonds (PRG - Akron Properties LLC - The University of Akron Project), consisting of $157.305 million of Series 2025A bonds and $209,000 of taxable Series 2025B bonds. RBC Capital Markets.
The Arkansas Development Finance Authority (/AAA/AAA/) is set to price Wednesday $150 million of revolving loan fund revenue bonds, Series 2026. Stephens Inc.
CSU Strata (/BB+//) is set to price Thursday $144.435 million of student housing revenue bonds (The Prospect Project), consisting of $137.15 million of Series 2025A bonds and $7.285 million of subordinate Series 2025B bonds. Morgan Stanley.
The South Carolina Jobs-Economic Development Authority (/A+//) is set to price Thursday $132.79 million of credit-enhanced residential development revenue bonds (Sixteenth Floor Obligated Group Projects), Series 2025. KeyBanc Capital Markets.
Fort Worth Independent School District (Aaa///) is set to price Thursday $131.54 million of PSF-insured unlimited tax refunding bonds, Series 2025A. BofA Securities.
The IPS Multi-School Building Corp. (/AA+//) is set to price Tuesday $121.205 million of social unlimited ad valorem property tax first mortgage bonds. Stifel, Nicolaus & Co.
The Public Finance Authority (/AA//) is set to price Thursday $120.24 million of BAM-insured student housing revenue bonds (PRG - Oxford Properties LLC Project), consisting of $117.59 million of Series 2025A and $2.65 million of Series 2025B. Raymond James.
Irving Independent School District (/AAA//) is set to price Wednesday $118.655 million of PSF-insured unlimited tax refunding bonds. BOK Financial Securities.
The Eagle Mountain-Saginaw Independent School District (Aaa//AAA/) is set to price this week $112.775 million of PSF-insured unlimited tax refunding bonds, Series 2025-A. Mesirow Financial.
Competitive
The California Infrastructure and Economic Development Bank (Aaa//AAA/) is set to sell $554.625 million of green clean water and drinking water state revolving fund revenue bonds at 11:30 a.m. Eastern Thursday.
King County, Washington, (/AAA//) is set to sell $234.170 million of limited tax GOs and refunding bonds, Series 2025B, at 10:45 a.m. Wednesday, and $118.035 million of taxable limited tax GOs, Series 2025C, at 11:15 a.m. on Wednesday.
St. Petersburg, Florida, (Aa2//AA/) is set to sell $127.940 million of public utility revenue bonds, Series 2025C, at 10:30 a.m. Wednesday.
The Moorestown Township Board of Education is set to sell $108.298 million of school bonds at 11 a.m. Wednesday.
Jessica Lerner and Christy Baker contributed to this report.
