Municipals were steady Friday ahead of a $12.9 billion new-issue calendar, led by two mega deals. U.S. Treasuries were weaker, and equities ended mixed.
The two-year muni-UST ratio Friday was at 65%, the five-year at 63%, the 10-year at 71% and the 30-year at 89%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 64%, the five-year at 63%, the 10-year at 71% and the 30-year at 90% at a 4 p.m. read.
"Overall muni performance during shutdowns is not overly conclusive: sometimes they outperform slightly, sometimes they underperform, but the average is not far from zero," said Barclays strategists, led by Mikhail Foux.
There is a bit more "directionality" in timing, as tax-exempts usually outperform a little bit ahead of shutdown and underperform afterward, they said, as seen during the last shutdown that started on Dec. 21, 2018, and ended on Jan. 25, 2019.
Rates often decline going into and after the beginning of government shutdowns, while munis slightly lag, but there is a reversal if shutdowns last long enough, Barclays strategists said.
The current shutdown could be protracted, as the two sides are nowhere near a resolution, they said.
Treasury rates have already fallen this week, due in part to the shutdown and softer employment data, and munis have lagged slightly, Barclays strategists said.
The new-issue calendar is at $12.948 billion, with $10.569 negotiated deals on tap and $2.379 billion of competitive ones.
The Texas Transportation Finance Corp. leads the negotiated calendar with $1.739 billion of subordinate tier toll revenue and refunding bonds, followed by New York City with $1.5 billion of general obligation bonds.
The competitive calendar is led by the Maryland Department of Transportation with $842.705 million of consolidated transportation bonds in two series.
In October, supply is typically a key driver of underperformance, and that is expected to continue this year, according to Barclays strategists.
While "the 30-day visible tax-exempt supply is not overwhelming at the moment, it should pick up starting next week, and the next three to four weeks should be quite heavy, bringing the total to $50 billion to $55 billion for the month," they said.
"On the negative side, we have much heavier supply (although it should likely last only a month or month and a half); on the positive side, we have fund inflows, much more robust retail investor participation and light dealer inventories (which are substantially lower than the average for the year)," Barclays strategists said.
For an inefficient marketplace, the market is behaving efficiently, and that starts with the underwriters, said Mark Paris, CIO and head of municipals at Invesco.
"Underwriters have done a really good job in making sure things clear," he said.
The days of big shops taking down 20% of deals are gone, Paris said.
"They're doing a good job of pricing the deals the right way, talking to people about the structures you know that they want," he said.
"I get a lot of calls from trading to say, 'Did you mind talking to my underwriter?' Because it's important to get that part right, otherwise the deal is going to cause a lot more havoc in the marketplace," Paris added.
And despite a large broker-dealer leaving the muni market, some smaller shops have stepped up, he noted.
Buyside players have been prudent in their decisions, Paris said.
"There's been a lot of yield swaps going on, on my side and other business to up your book yield and book losses and all that stuff. And I think that has led to enough of a flow to cover these deals," he said.
In the primary market Friday, Goldman Sachs priced for the Lower Alabama Gas District (A1///) $669.285 million of gas project revenue refunding bonds, Series A, with 5s of 12/2031 at 3.84% and 5s of 2033 at 4.12%, callable 9/2033.
AAA scales
MMD's scale was unchanged: 2.40% in 2026 and 2.32% in 2027. The five-year was 2.32%, the 10-year was 2.91% and the 30-year was 4.21% at 3 p.m.
The ICE AAA yield curve was little changed: 2.36% (unch) in 2026 and 2.29% (+1) in 2027. The five-year was at 2.32% (unch), the 10-year was at 2.91% (unch) and the 30-year was at 4.23% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.39% (unch) in 2025 and 2.30% (+1) in 2026. The five-year was at 2.31% (+1), the 10-year was at 2.91% (unch) and the 30-year yield was at 4.21% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.29% in 2025 and 2.25% in 2026. The five-year at 2.28%, the 10-year at 2.88% and the 30-year at 4.21% at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.575% (+3), the three-year was at 3.59% (+4), the five-year at 3.714% (+4), the 10-year at 4.12% (+4), the 20-year at 4.68% (+3) and the 30-year at 4.713% (+2) near the close.
Primary to come
The Texas Transportation Finance Corp. (Aa1/AA+//) is set to price Tuesday $1.739 billion of subordinate tier toll revenue and refunding bonds, consisting of $1.678 billion of tax-exempt Series 2025A bonds and $61.2 million of taxable Series 2025B bonds. BofA Securities.
New York City (Aa2/AA/AA/AA+/) is set to price Wednesday $1.5 billion of GOs, Fiscal 2026 Series D. J.P. Morgan.
The PeaceHealth Obligated Group (/A-/A+/) is set to price Tuesday $787.356 million of taxable bonds. Morgan Stanley.
The San Diego Unified School District is set to price Wednesday $670 million of GOs, consisting of $7.355 million of taxable Series P-1 Election of 2008 bonds (Aa2///), $92.645 million of Series P-2 Election of 2008 bonds (Aa2//AAA/AAA/), $11.115 million of taxable Series I-1 Election of 2018 bonds (Aa2///), $25 million of Series I-2 Election of 2018 bonds (Aa2//AAA/AAA.), $213.885 million of Series I-3 Election of 2018 bonds (Aa2//AAA/AAA/), $13.825 million of taxable Series C-1 Election of 2022 bonds (Aa2///), $10 million of Series C-2 Election of 2022 bonds (Aa2//AAA/AAA/), and $296.175 million of Series C-3 Election of 2022 bonds (Aa2//AAA/AAA/). Jefferies.
The North Texas Tollway Authority is set to price Monday $627.175 million of system revenue refunding bonds, consisting of $502.065 million of Series 2025A bonds (Aa3/AA-//) and $125.11 million of Series 2025B bonds (A1/A+//). J.P. Morgan.
Massachusetts (Aa1/AAA//AAA) is set to price Wednesday $493.2 million of commonwealth transportation fund revenue and refunding bonds, consisting of $325 million of Series R bonds and $168.2 million of Series 2025A bonds. J.P. Morgan.
Columbus, Ohio, (Aaa/AAA/AAA/) is set to price Tuesday $470.405 million of various purpose GOs, consisting of $218.69 million of unlimited tax bonds, Series 2025A; $23.23 million of limited tax bonds, Series 2025B, $88.545 million of unlimited tax refunding bonds, Series 2025-1; $31.86 million of limited tax refunding bonds, Series 2025-2; $48.165 million of taxable unlimited tax bonds, Series 2025C; and $59.915 million of taxable limited tax bonds, Series 2025D. RBC Capital Markets.
Albany Capital Resource Corp. (A2/A//) is set to price Thursday $385.49 million of tax-exempt revenue refunding bonds (Albany Medical Center Hospital project), Series 2025A. Jefferies.
The New Jersey Housing and Mortgage Finance Agency (/AA-//) is set to price Tuesday $371.695 million of social multi-family revenue bonds, consisting of $123.09 million of non-AMT bonds, Series 2025A; $220.87 million of non-AMT bonds, Series 2025B; and $27.735 million of taxable bonds, Series 2025C. Wells Fargo.
The California Municipal Finance Authority is set to price $371.526 million of municipal certificates, Series 2025-2, consisting of $313.01 million of Class A-1 bonds (/AA-//), $50.156 million of Class A-2 bonds (/BBB//), and $8.36 million of nonrated Class B subordinate bonds. BofA Securities.
The General Authority of Southcentral Pennsylvania (Aa3//AA-/) is set to price Tuesday $270.215 million of bonds (WellSpan Health Obligated Group), consisting of $92.355 million of Series 2025A bonds and $177.86 million of Series 2025B bonds. BofA Securities.
The Oklahoma Municipal Power Authority (/A/A/) is set to price Tuesday $248.68 million of power supply system revenue and refunding bonds, Series 2025A. Goldman Sachs.
The South Carolina State Housing Finance and Development Authority (Aaa///) is set to price Thursday $195 million of non-AMT mortgage revenue bonds, Series 2025C. BofA Securities.
Ohio (A3/A//) is set to price Thursday $172.815 million of hospital revenue bonds (University Hospitals Health System, Inc.), Series 2025A. BofA Securities.
The Westmoreland County Municipal Authority, Pennsylvania, (/AA//) is set to price Tuesday $152.355 million of municipal service revenue refunding bonds, Series 2025A. Stifel.
The Roanoke Economic Development Authority, Virginia, (Aa3/AA-//) is set to price Tuesday $147.95 million of hospital revenue bonds (Carilion Clinic Obligated group), Series 2025A. BofA Securities.
The Fontana Public Facilities Financing Authority (/AA-//) is set to price Wednesday $135.205 million of lease revenue bonds, Series 2025A. Ramirez.
Gadsden, Alabama, (/AA//) is set to price Tuesday $127.6 million of GO warrants, Series 2025A. Stifel.
The Build NYC Resource Corp. (/BB+//) is set to price Thursday $121.765 million of revenue bonds, consisting of $119.765 million of tax-exempt Series 2025A bonds and $2 million of taxable Series 2025B bonds. Raymond James.
The South Carolina Jobs & Economic Development Authority is set to price Thursday $113.385 million of senior living revenue bonds (Connexion Communities project), consisting of $112.53 million of Series 2025A1 bonds and $855,000 of Series 2025A2 bonds. D.A. Davidson.
Larimer County, Colorado, (/AA+//) is set to price Tuesday $110 million of certificates of participation, consisting of $80.005 million of tax-exempts, Series 2025A, and $29.995 million of taxables, Series 2025B. Piper Sandler.
The Tempe Industrial Development Authority is set to price Thursday $108.595 million of nonrated revenue and refunding bonds (Friendship Village of Tempe project). Ziegler.
Competitive
The Maryland Department of Transportation (Aa1/AAA/AA+/) is set to sell $497.705 million of consolidated transportation refunding bonds, Series 2025C, at 11 a.m. Eastern Wednesday, and $345 million of consolidated transportation bonds, Series 2025B, at 10:30 a.m. on Wednesday.
Oklahoma County is set to sell $215 million of GO limited tax bonds at 9:30 a.m. Wednesday.
Broward County, Florida, (Aa1/AA+//) is set to sell $158.845 million of water and sewer utility revenue refunding bonds at 10:30 a.m. Wednesday.
Jersey City, New Jersey, (A1///) is set to sell $124.45 million of general improvement bonds at 11 a.m. Tuesday.
Houston is set to sell $121 million of tax and revenue notes at 10 a.m. Wednesday.
Frank Gargano contributed to this report.
