Municipals were firmer Wednesday as U.S. Treasury yields fell in sympathy and equities ended mixed.
Muni yields were bumped two to five basis points, depending on the scale, while UST yields fell two to five basis points.
The two-year muni-UST ratio Wednesday was at 58%, the five-year at 61%, the 10-year at 73% and the 30-year at 91%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 57%, the five-year at 60%, the 10-year at 71% and the 30-year at 91% at a 4 p.m. read.
The Investment Company Institute Wednesday reported outflows of $159 million for the week ending Sept. 3, following $356 million of inflows the previous week. This differs from LSEG Lipper, which reported $672.3 million of inflows over the same reporting period.
Exchange-traded funds saw inflows of $429 million after $1.219 billion of inflows the week prior, per ICI data.
With summer over, and market participants reassembled, "active strategizing for the balance of 2025 is taking place across the investor community," said strategist Jeff Lipton.
"As part of the calculus, the market seems to be pricing in a 25-basis-point reduction in the fed funds rate, with stakeholders poised to hang on every word spoken by [Federal Reserve Chair Jerome] Powell during his post-meeting press conference next week," he said.
The front end of the steepening muni yield curve will be most affected by an easing policy bias, he said.
Short-term yields have been on the decline for around five months, while falling longer-term yields throughout August added to last month's strong performance, pushing year-to-date returns into positive territory, Lipton said.
The long end, he noted, will likely remain "tethered to the vagaries of fiscal policy and the overall mixed signals coming out of Washington," he said.
"While the short end had been a safe spot for certain investors, expectations for duration extensions to capture more compelling yield and income opportunities are becoming more pronounced given a shift in monetary policy," Lipton said.
With growing evidence of a slowing labor backdrop, the Fed is justified to cut rates 25 basis points, with another quarter-point drop by yearend, he said.
The market is tested this week by the new-issue calendar, which looks big but is not, said Chad Farrington, co-head of municipal bond investment strategy at DWS.
Almost a third of the estimated $10-plus billion in issuance from the two large airport deals, $2 billion for the Dallas-Fort Worth International Airport and $1 billion for the Hartsfield-Jackson Atlanta International Airport, which should be well received, he said.
There are also a few high-yield deals "sprinkled in," Farrington said.
October is looking to be another blockbuster month for supply, with several $1 billion-plus deals on the shadow calendar, said Pat Luby, head of municipal strategy at CreditSights.
Among the megadeals expected to hit the market next month: $1.8 billion for the Texas Transportation Finance Corp.; $1.5 billion in New York City tax-exempt GOs; another $1.5 billion of NYC taxable GOs; and $1.2 billion for Kentucky's State Property and Building Commission.
"Historically, October has been the busiest month of the year and it's shaping up that way again," Luby said.
In the primary market Wednesday, BofA Securities priced for the cities of Dallas and Fort Worth, Texas, (A1/AA-//AA/) $1.694 billion of
The second tranche, $300 million of Series 2025A-2 bonds, saw 5s of 11/2050 with a mandatory tender date of 11/2029 at 3.11%, callable 8/2029, and 5s of 2050 with a mandatory tender of 11/2032 at 3.63%, callable 8/2032.
Raymond James priced for the cities of Dallas and Fort Worth, Texas, (A1/AA-//AA/) are set to price Wednesday $286.295 million of non-AMT Dallas Fort Worth International Airport joint revenue refunding and improvement bonds, Series 2025B, with 5s of 11/2026 at 2.23%, 5s of 2030 at 2.35%, 5s of 2035 at 3.18%, 5s of 2040 at 3.92%, 5.25s of 2045 at 4.37%, 5.25s of 2050 at 4.55% and 5.25s of 2056 at 4.61%, callable 11/2034.
AAA scales
MMD's scale was bumped three to five basis points: The one-year was at 2.12% (-3) and 2.03% (-3) in two years. The five-year was at 2.20% (-3), the 10-year at 2.93% (-5) and the 30-year at 4.26% (-5) at 3 p.m.
The ICE AAA yield curve was bumped five basis points: 2.09% (-5) in 2026 and 2.02% (-5) in 2027. The five-year was at 2.17% (-5), the 10-year was at 2.91% (-5) and the 30-year was at 4.32% (-5) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped three basis points: The one-year was at 2.11% (-3) in 2025 and 2.03% (-3) in 2026. The five-year was at 2.20% (-3), the 10-year was at 2.95% (-3) and the 30-year yield was at 4.28% (-3) at 4 p.m.
Bloomberg BVAL was bumped two to five basis points: 2.07% (-2) in 2025 and 2.06% (-3) in 2026. The five-year at 2.16% (-3), the 10-year at 2.92% (-4) and the 30-year at 4.27% (-5) at 4 p.m.
Treasuries saw gains.
The two-year UST was yielding 3.541% (-2), the three-year was at 3.493% (-3), the five-year at 3.589% (-3), the 10-year at 4.043% (-5), the 20-year at 4.641% (-4) and the 30-year at 4.692% (-4) near the close.
Primary to come
The
The Sullivan County Resort Facilities Local Development Corp. is set to price Thursday $561 million of nonrated tax-exempt revenue bonds. KeyBanc Capital Markets.
The Adventist Health System/West (/BBB+/BBB+/) is set to price Thursday $372.62 million of taxable corporate CUSIPs. RBC Capital Markets.
The California Health Facilities Financing Authority (/BBB+/BBB+/) is set to price Thursday $308.425 million of Adventist Health System/West fixed-mode revenue bonds, Series 2025A. RBC Capital Markets.
Competitive
Salt Lake County, Utah, (/AAA//) is set to sell $115.055 million of sales tax revenue bonds at 11:30 a.m. Thursday.
The Boston Water and Sewer Commission is set to sell $100 million of senior general revenue bonds, Series 2025A, at 11 a.m. Thursday
Caitlin Devitt contributed to this report.
