Munis were steady Monday as issuance falls this week due to the Federal Open Market Committee meeting where a 25-basis-point rate cut is expected. U.S. Treasuries were slightly firmer out long and equities ended up.
The two-year muni-UST ratio Monday was at 70%, the five-year at 65%, the 10-year at 68% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 66%, the 10-year at 68% and the 30-year at 89% at a 4 p.m. read.
The muni market dealt with the influx of supply last week with "ease," as the heavy issuance saw deals multiple times oversubscribed and some repricings approaching double-digit tightening, said Birch Creek Capital strategists.
The $16 billion tax-exempt calendar, the fifth largest ever, was absorbed "surprisingly well at the long end," which is notable given the limited reinvestment and richer valuations compared to the summer, said J.P. Morgan strategists, led by Peter DeGroot.
"Instead, the fall market narrative has centered on lower absolute rates and higher inflows, with $17 billion entering municipal funds since August," they said.
Continued positive inflows helped the market "take down" issuance, as muni investors added $1.123 billion to muni mutual funds, the fourth straight week of inflows, Daryl Clements, a portfolio manager at AllianceBernstein said, citing LSEG Lipper data.
"Given the focus on new deals, plus a lack of a need to raise cash, customer BWICs and secondary purchase volumes fell 7%-8%," Birch Creek strategists said.
Demand, though, wasn't "all uniform," as the richest parts of the curve struggled, they said.
The front end, which saw muni-UST ratios start the week at 65%-68%, saw cuts every day last week with the two-year muni rising nine basis points, Birch Creek strategists said.
Meanwhile, the belly of the curve outperformed for the third consecutive week after yields fell six basis points in 10 years and now deal with ratios below 70%, they said.
"With some relief up front, we expect accounts will begin to barbell, especially as the long end remains the cheapest part of the curve," Birch Creek strategists said.
Issuance is light this week, with $5.367 billion on tap, and it should be "easily distributed," J.P. Morgan strategists said.
However, several large deals are on tap for early November.
For the first week of November, the large deals consist of $2.65 billion of energy supply revenue bonds from the Southeast Energy Authority, $977 million of water system revenue bonds from the Los Angeles Department of Water and Power and $767 million of GOs from the state of Washington.
Market technicals are likely to further strengthen heading into November and December, Clements said.
"The market will likely benefit from lighter anticipated supply and a wave of reinvestment cash — let alone additional inflows," he said.
And with a "more favorable" year-end technical period, rates and flows will continue to outweigh technicals in the long end, J.P. Morgan strategists said.
Meanwhile, "the short end could see solid performance in November, thanks to more attractive valuations and steadier reinvestment throughout the month," they said.
In the primary market Monday, Wells Fargo priced for North Carolina (Aa1/AA+/AA+/) $165.155 million of limited obligation refunding bonds, Series 2025B, with 5s of 5/2026 at 2.68%, 5s of 2030 at 2.52% and 5s of 2033 at 2.67%, noncall.
AAA scales
MMD's scale was cut up to two basis points: 2.53% (unch) in 2026 and 2.44% (unch) in 2027. The five-year was 2.36% (unch), the 10-year was 2.70% (unch) and the 30-year was 4.12% (+2) at 3 p.m.
The ICE AAA yield curve was unchanged: 2.50% in 2026 and 2.42% in 2027. The five-year was at 2.39%, the 10-year was at 2.73% and the 30-year was at 4.08% at 4 p.m.
The S&P Global Market Intelligence municipal curve saw small cuts: The one-year was at 2.52% (+1) in 2025 and 2.44% (+1) in 2026. The five-year was at 2.36% (unch), the 10-year was at 2.72% (+1) and the 30-year yield was at 4.09% (+1) at 3 p.m.
Bloomberg BVAL was little changed: 2.49% (unch) n 2025 and 2.44% (+1) in 2026. The five-year at 2.34% (+1), the 10-year at 2.70% (unch) and the 30-year at 4.04% (unch) at 4 p.m.
Treasuries were slightly firmer out long.
The two-year UST was yielding 3.502% (+2), the three-year was at 3.504% (+1), the five-year at 3.615% (+1), the 10-year at 3.992% (-1), the 20-year at 4.536% (-3) and the 30-year at 4.562% (-3) near the close.
Primary to come
The Chicago Board of Education (/BB+//BBB-/) is set to price Tuesday $1.093 billion of unlimited tax GO refunding bonds, consisting of $829.175 million of Series 2025B and $264.035 million of Series 2025C. BofA Securities.
The Virginia Housing Development Authority (Aaa/AAA//) is set to price Tuesday $450 million of commonwealth mortgage bonds, consisting of $75 million of non-AMT Series E bonds, $150 million of taxable Series F bonds and $225 million of non-AMT Series G bonds. BofA Securities.
The Connecticut Housing Finance Authority (Aaa/AAA//) is set to price Tuesday $289.975 million of social housing mortgage finance program bonds, consisting of $20 million of Subseries E-1 bonds and $269.975 million of taxable Subseries E-2 bonds. BofA Securities.
The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price $200.48 million of taxable single-family mortgage Class I bonds, 2025 Series O-1. RBC Capital Markets.
The North Carolina Housing Finance Agency (Aa1/AA+//) is set to price Tuesday $200 million of non-AMT home ownership revenue bonds, Series 59-A. BofA Securities.
The Harris County Cultural Education Facilities Finance Corp., Texas, (/AA//) is set to price Wednesday $200 million of Houston Methodist revenue bonds, Series 2025G. Jefferies.
Clemson University, South Carolina, (Aa2//AA/) is set to price Tuesday $174.635 million of higher education refunding revenue bonds, Series 2025A. Morgan Stanley.
The Glendale Industrial Development Authority, Arizona, (/AA-/AA/) is set to price Tuesday $150 million of Midwestern University revenue bonds. Raymond James.
The California Housing Finance Agency is set to price Wednesday $134.015 million of non-AMT sustainability affordable housing revenue bonds, 2025 Series B. RBC Capital Markets.
Broward County, Florida, (A1/A//) is set to price Tuesday $132.765 million of AMT port facilities revenue bonds. Jefferies.
The River Islands Public Financing Authority Improvement Area No. 3, California, is set to price $112.375 million of Community Facilities District No. 2023-1 special tax bonds. HilltopSecurities.
Competitive
Florence, South Carolina, (Aa2/AA-//) is set to sell $143.645 million of combined waterworks and sewerage system capital improvement revenue bonds, at 11 a.m. Eastern Wednesday.
The Virginia Public School Authority is set to sell $104.75 million of special obligation school financing bonds at 10:45 a.m. Thursday.
