Municipals strengthened to start the week as U.S. Treasury yields fell, with the largest gains out long. Equities ended up.
Muni yields were bumped up to eight basis points, depending on the curve, on Tuesday, after U.S. rates sold off for most of last week on the heels of passed legislation, said Barclays strategists Mikhail Foux and Grace Cen.
Last week's weakness pushed the asset class to see losses for May at -0.22%, pushing year-to-date returns down to -1.24% for the year.
But despite that cheapening, "we are still [in a] better position than we were back in April when tariffs were put in place and when rumors began to spread from Capitol Hill in Washington of the potential elimination of the tax-exempt status of munis," said Jason Wong, vice president of municipals at AmeriVet Securities.
Last week, muni-UST ratios continued falling, as the 30-year ratio fell below 90% for the first time in two and a half months, Barclays strategists said.
The two-year muni-UST ratio Tuesday was at 71%, the five-year at 71%, the 10-year at 75% 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 69%, the five-year at 70%, the 10-year at 72% and the 30-year at 89% at 4 p.m.
Even though munis have richened compared to Treasuries since mid-April, "munis are still cheaper overall versus Treasuries since the start of the year when the ratio was at 68.41% and are still off from their highest levels back in March 2024," Wong said.
Tax-exempts, from a relative value standpoint, are not currently that attractive, but total return investors may begin to find current levels "appetizing," Barclays strategists said.
Over the past several years, whenever the yield of the long index topped 5%, muni buyers appeared en masse, pushing muni yields lower in a short period of time, they said.
Supporting the muni market is the potential for issuance to begin moderating, as the increase in rates may keep issuers on the sidelines, said Barclays strategists.
"Moreover, there are no restrictions on the tax exemption in the 'One, Big, Beautiful Bill,' which would mean that there is less pressure for municipalities to come to the market at this point," they said.
Furthermore, summer redemptions will be supportive, with $31 billion in bond maturities and $12 billion in coupons in June, Barclays strategists said.
AAA scales
MMD's scale was bumped up to five basis points: The one-year was at 2.82% (unch) and 2.80% (-3) in two years. The five-year was at 2.87% (-5), the 10-year at 3.34% (-3) and the 30-year at 4.52% (-2) at 3 p.m.
The ICE AAA yield curve was bumped up to four basis points: 2.82% (unch) in 2026 and 2.75% (-2) in 2027. The five-year was at 2.88% (-2), the 10-year was at 3.27% (-3) and the 30-year was at 4.46% (-3) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped up to four basis points: The one-year was at 2.83% (unch) in 2025 and 2.81% (-3) in 2026. The five-year was at 2.86% (-4), the 10-year was at 3.33% (-3) and the 30-year yield was at 4.52% (-2) at 4 p.m.
Bloomberg BVAL was bumped two to eight basis points: 2.78% (-4) in 2025 and 2.79% (-6) in 2026. The five-year at 2.88% (-7), the 10-year at 3.31% (-4) and the 30-year at 4.48% (-2) at 4 p.m.
Treasury yields fell.
The two-year UST was yielding 3.973% (-2), the three-year was at 3.928% (-3), the five-year at 4.031% (-5), the 10-year at 4.44% (-7), the 20-year at 4.957% (-9) and the 30-year at 4.945% (-9) near the close.
Primary to come
The New Jersey Turnpike Authority (A1/AA-//) is set to price Thursday $1 billion of turnpike revenue refunding bonds, Series 2025B, serials 2026-2039. Jefferies.
The authority is also set to price Thursday $750 million of turnpike revenue bonds, Series 2025 A, serials 2043-2045, terms 2050, 2055. Barclays.
The Omaha Public Power District, Nebraska, (Aa2/AA//) is set to price Thursday $503.23 million of electric system revenue bonds, 2025 Series A, serials 2030-2045, terms 2050, 2055. Goldman Sachs.
The Hawaii Department of Budget and Finance (/AA-/AA/) is set to price Wednesday $316.945 million of the Queen's Health Systems special purpose revenue bonds, Series A, serials 2026-2043. BofA Securities.
The Board of Trustees of Michigan State University (Aa2/AA//) is set to price Thursday $386.765 million of general revenue refunding bonds, serial 2026-2045, terms 2050, 2055. Jefferies.
The Maryland Health and Higher Educational Facilities Authority (/A-/A/) is set to price Thursday $361.17 million of Meritus Health issue revenue bonds. Truist.
The Lewisville Independent School District, Texas, (/AAA/AAA/) is set to price Wednesday $282.055 million of PSF-insured unlimited tax school building and refunding bonds, serials 2026-2045. Raymond James.
The Connecticut Housing Finance Authority (Aaa/AAA//) is set to price Wednesday $270 million of social housing mortgage finance program bonds, consisting of $20 million of 2025 Subseries C-1 bonds, serials 2026-2028, 2031-2032, terms 2040, 2047; and $250 million of taxable 2025 Subseries C-2 bonds, serials 2027-2037, terms 2040, 2045, 2047, 2055. Wells Fargo.
The South Dakota Housing Development Authority is set to price Thursday $199 million of homeownership mortgage bonds, consisting of $125 million of non-AMT 2025 Series C bonds, serials 2036-2037, terms 2040, 2045, 2052, 2056; and $74 million of taxable 2025 Series D bonds, serials 2026-2037, terms 2040, 2045, 2051, 2055. Wells Fargo.
The Moreno Valley Unified School District, California, (Aa3/AA//) is set to price Wednesday $165.53 million of GOs, consisting of $50 million of Election of 2014 GOs, Series E, serials 2025-2027, 2032-2045, term 2050; $100 million of Election of 2024 GOs, Series A, serials 2026-2027, 2032-2045, terms 2050, 2052; and $15.53 million of 2025 GO refunding bonds, serials 2026, 2029-2030, 2033-2035. Piper Sandler.
The National Finance Authority is set to price Thursday $162.615 million of social affordable housing certificates. Wells Fargo.
The California Housing Finance Agency (Aa2/AA//) is set to price Thursday $157.04 million of non-AMT sustainability affordable housing revenue bonds, 2025 Series A. Morgan Stanley.
The Public Finance Authority is set to price Thursday $132.35 million of ISF-Potomac Senior Living senior living revenue bonds, consisting of $128.39 million of Series A and $3.96 million of Series B. HJ Sims.
The University of Kentucky (Aa3/AA//) is set to price Wednesday $102.195 million of University of Kentucky parking structure No.7 And Johnson Center expansion lease purchase obligations, consisting of $91.595 million of Series A bonds, serials 2032-2045, terms 2050, 2055; and $10.6 million of taxable Series B bonds, serials 2027-2032. RBC Capital Markets.
Competitive
The Conning City School District, New York, is set to sell $56.545 million of school district serial bonds at Wednesday at 11 a.m. eastern Tuesday.
