Municipals were little changed — no more than a basis point or two — Thursday as U.S. Treasury yields rose and equities ended mixed.
The two-year muni-UST ratio Thursday was at 62%, the five-year at 65%, the 10-year at 76% and the 30-year at 95%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 62%, the five-year at 66%, the 10-year at 75% and the 30-year at 94% at a 4 p.m. read.
The market has quieted down a little recently compared to the volatility of this past year in terms of daily and secondary volumes, said Tim Iltz, a fixed income credit and market analyst at HJ Sims.
Clients have expressed interest in shorter tenors, which may have been more appealing for several reasons, including the slope of the yield curve, he said.
"With ratios, there's a lot of focus that's being put on the longer end, but a lot of these accounts aren't able to do that for various reasons, some of it because of their mandate that prohibits them from going longer, and others had extended a little bit early," Iltz said.
The muni curve looks steeper when compared to the UST curve. Thirty-year munis are 88 basis points higher than at the start of the year, while 30-year USTs are around 17 basis points higher, he noted.
"A lot of that can be attributed to these technical factors ... we refer to as a deluge of issuance," Iltz said.
"As month-end approaches, certain sectors have pulled ahead of others as most yields remain at the upper end of recent ranges on heavy supply conditions," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
While intermediate long maturities have softened by eight to 17 basis points, "the 1-5 year area has posted performance of 10-15 basis points from June's closing levels," she said. The demand for short-call bonds was created by "yield and spread compression in short maturities."
"Recent trades in Aa1/AA+ New York Dormitory Authority/Personal Income Tax 5s due 2030 with a 2027 call printed at 2.64% (+19/MMD YTC), as compared to a cross trade in mid-June at 3.03% (spread +33/MMD YTC)," Olsan said.
Increased supply has also generated increased secondary trading, she said.
"Trade data show consecutively higher volumes in the last week, with the July 23rd session posting more than $12 billion in trades — the highest tally since mid-April," she said.
However, a concern this year in the secondary market is the "fickle nature" of trade patterns, according to Iltz.
"We'll have some days when you know it seems like we are just overwhelmed by bid lists, and other days where you know we're not necessarily looking for things to do, but we're trying to figure out how we should be spending our time, because we're not seeing that same level of activity," he said.
Historically, things have been more consistent in the past, but with the on-again, off-again tariff narrative, there has been a much more "erratic" supply of things in the secondary market, he said.
In the primary market Thursday, Morgan Stanley priced and repriced for the Tarrant County Cultural Education Facilities Finance Corp. (Aa2/AA//) an upsized pricing of $911.47 million of Texas Health Resources System revenue bonds. The first tranche, $311.47 million of Series A bonds, saw 5s of 11/2037 at 4.17%, 5s of 2040 at 4.46%, 5s of 2049 at 5.08% and 5s of 2055 at 5.16%, callable 11/15/2035.
The second tranche, $300 million of Series B bonds, saw 5s of 11/2064 with a mandatory tender of 11/15/2029 at 3.09%, callable 11/15/2028.
The third tranche, $300 million of Series C bonds, saw 5s of 2064 with a mandatory tender date of 11/15/2032 at 3.58%, callable 11/15/2031.
Wells Fargo priced for Houston (/A+//AA-/) $701.315 million of airport system subordinate lien revenue bonds. The first tranche, $678.045 million of AMT refunding bonds, Series A, saw 5s of 7/2028 at 3/08%, 5s of 2030 at 3.30%, 5s of 2035 at 4.22%, 5s of 2040 at 4.79%, 5.5s of 2045 at 5.14%, 5.5s of 2050 at 5.22% and 5.5s of 2055 at 5.26%, callable 7/1/2035.
The second tranche, $23.27 million of non-AMT bonds, Series B, saw 5.5s of 7/2055 at 5.01%, callable 7/1/2035.
Piper Sandler priced for the Spring Branch Independent School District, Texas, (Aaa/AAA//) $317.34 million of unlimited tax school building and refunding bonds, with 5s of 2/2026 at 2.56%, 5s of 2030 at 2.80%, 5s of 2035 at 3.57%, 5s of 2040 at 4.35%, 5s of 2045 at 4.78% and 5s of 2049 at 4.92%, callable 2/1/2035.
RBC Capital Markets priced for the Illinois Housing Development Authority (Aaa///) $283.35 million of social revenue bonds. The first tranche, $150 million of Series D non-AMT bonds, saw all bonds priced at par — 2.95s of 4/2026, 3.35s of 4/2030, 3.35s of 10/2030, 4.2s of 4/2035, 4.25s of 10/2035, 4.9s of 10/2040, 5.15s of 10/2045 and 5.25s of 10/2050 — except for 6.25s of 2055 at 3.91%, callable 10/1/2033.
The second tranche, $133.35 million of Series E taxable bonds, saw all bonds price at par — 4.184s of 10/2026, 4.404s of 4/2030, 4.464s of 10/2030, 5.434s of 4/2035, 5.474s of 10/2035, 5.834s of 10/2040 and 5.993s of 2044 — except for 6.25s of 4/2056 at 4.984%, callable 10/1/2033.
Wells Fargo priced for the Miami-Dade County Housing Finance Authority (Aa1///) $117.5 million of Ambar Station housing revenue bonds, Series A, with 3.25s of 2/2044 with a mandatory tender date of 8/1/2029 at par, callable 8/1/2028.
In the competitive market, the Florida Department of Transportation (Aa2/AA/AA//) sold $147.7 million of Florida Turnpike revenue bonds, Series 2025C, to BofA Securities, with 5s of 2026 at 2.48%, 5s of 2030 at 2.69%, 5s of 2035 at 3.50%, 5s of 2040 at 4.22%, 5s of 2045 at 4.72%, 4.75s of 2050 at 4.86% and 5s of 2055 at par, callable 7/1/2035.
The Freehold Township Board of Education, New Jersey, (Aa2///) sold $135.468 million of school bonds, Series 2025, to Jefferies, with 4s of 8/2027 at 2.43%, 4s of 2030 at 2.62%, 4s of 2035 at 3.40%, 4s of 2040 at 4.25% and 4.25s of 2045 at 4.75%, callable 8/15/2033.
Fund flows
Investors added $571.5 million to municipal bond mutual funds in the week ended Wednesday, following $224.6 million of outflows the prior week, according to LSEG Lipper data.
High-yield funds saw outflows of $202.1 million compared to inflows of $34.1 million the previous week.
Tax-exempt municipal money market funds saw outflows of $1.314 billion for the week ending July 22, bringing total assets to $136.069 billion, according to the Money Fund Report, a weekly publication of EPFR.
The average seven-day simple yield for all tax-free and municipal money-market funds rose to 2.13%.
Taxable money-fund assets saw $16.506 billion added, bringing the total to $6.902 trillion.
The average seven-day simple yield was at 3.98%.
The SIFMA Swap Index was at 2.73% on Wednesday compared to the previous week's 2.46%.
AAA scales
MMD's scale was unchanged: The one-year was at 2.43% and 2.43% in two years. The five-year was at 2.57%, the 10-year at 3.34% and the 30-year at 4.71% at 3 p.m.
The ICE AAA yield curve was cut up to a basis point: 2.43% (+1) in 2026 and 2.41% (+1) in 2027. The five-year was at 2.61% (+1), the 10-year was at 3.29% (+1) and the 30-year was at 4.66% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.43% in 2025 and 2.44% in 2026. The five-year was at 2.57%, the 10-year was at 3.34% and the 30-year yield was at 4.71% at 4 p.m.
Bloomberg BVAL was cut two basis points 12 years and out: 2.42% (unch) in 2025 and 2.44% (unch) in 2026. The five-year at 2.54% (-2), the 10-year at 3.31% (unch) and the 30-year at 4.71% (+2) at 4 p.m.
Treasuries saw losses.
The two-year UST was yielding 3.924% (+4), the three-year was at 3.876% (+5), the five-year at 3.974% (+4), the 10-year at 4.417% (+3), the 20-year at 4.952% (+3) and the 30-year at 4.961% (+3) just before the close.
Frank Gargano contributed to this report
