Municipals were little changed Tuesday as two mega deals from New York issuers held one-day retail orders. U.S. Treasuries were slightly weaker and ended mixed after data showed inflation is cooling.
With April's CPI print coming in below estimates, it was unsurprising that the bond market rallied slightly at the start of the day, said John Kerschner, head of U.S. securitized products & portfolio manager at Janus Henderson.
However, as the day progressed USTs moved higher and yields rose slightly to end the day.
Munis, meanwhile, were little changed.
"We would expect that bond prices and rates would stay in the range they have been for most of 2025 until we get more clarity on the fluid tariff situation and the Fed's reaction function to at least some increase in inflation in the coming months," Kerschner said.
Even with Monday's U.S.-China tariff truce and Tuesday's inflation print, the market has felt better over the past several weeks, said Jamie Iselin, managing director and head of municipal fixed income at Neuberger Berman.
However, the muni market is not "out of the woods" just yet as there is still heavy supply on tap, he said.
Additionally, in the next several weeks, market participants will start looking at their June 1 maturities, he noted.
"We're moving to a time where technicals, even on the supply side, will be heavier. We're at a point where there's going to be a lot of bonds maturing and reinvestment in the market," Iselin said.
"We'll be seeing how heavy [issuance] is in the summer, and does the market, with the redemptions, maintain an equilibrium, or we're just getting $13 billion to $15 billion every week, and how does that play out?" he said.
This influx of supply will only help issuance this year to top 2024's $500-plus billion figure.
Some of the deals contributing to the rise in supply come from large capital expenditure deals that are coming with a concession to clear the market, which Iselin said is working.
The market will be watching a nearly $1.5 billion deal from the New York City Transitional Authority this week, he said.
Meanwhile, the high-yield market has a very healthy tone to it right now that seems like there's a lot of money to be put to work, according to Iselin.
And now that the calendar is ramping up, those deals will see strong levels of oversubscription, he said.
Elsewhere, munis are cheap, with short and intermediate muni-UST ratios hovering around low- to mid-70s, Iselin said.
The two-year ratio Monday was at 72%, the five-year at 72%, the 10-year at 74% and the 30-year at 89%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 71%, the five-year at 72%, the 10-year at 73% and the 30-year at 90% at 4 p.m.
"You always get more worried about munis. There's a coil spring effect: if we're yielding 60% of Treasuries, everything has to stay perfect for us to hang in there," Iselin said.
There is some cushion with the robust issuance this year and the selloff in April left the market with a lot of relative value, he said.
"So even today, if you get a Treasury market selloff for one day or two days, it's not the end of the world for munis at these valuations," Iselin said.
In the primary market Tuesday, Jefferies held a one-day retail order for the New York City Transitional Finance Authority's (Aa1/AAA/AAA/) $1.153 billion of tax-exempt future tax secured subordinate bonds. The first tranche, $650 million of Fiscal 2025 Series I, Subseries I-1 bonds, saw 5s of 5/2041 at 4.26%, 5s of 2045 at 4.57%, 5s of 2050 at 4.73% and 5.25s of 2055 at 4.73%, callable 5/15/2035.
The second tranche, $482.275 million of Fiscal 2025 Series J, Subseries J-1 refunding bonds, saw 5s of 11/2027 at 3.06%, 5s of 2030 at 3.22%, 5s of 2035 at 3.62% and 5s of 2036 at 3.73%, callable 5/1/2035.
The third tranche, $20.82 million of Fiscal 2025 Series K refunding bonds, saw 5s of 11/2025 at 3.00%, 5s of 2030 at 3.22%, 5s of 2035 at 3.62% and 5s of 2036 at 3.73%, callable 5/1/2035.
RBC Capital Markets held a one-day retail order for the
The second tranche, $28.02 million of Series B, saw 5s of 10/2026 at 3.10%, 5s of 2030 at 3.27%, 5s of 2035 at 3.72% and 5s of 2040 at 4.22%, callable 10/1/2034.
The third tranche, $20.53 million of Series C, saw 5s of 10/2026 at 3.20%, 5s of 2030 at 3.37%, 5s of 2035 at 3.82%, 5s of 2040 at 4.32% and 5s of 2044 at 4.68%, callable 10/1/2034.
Jefferies preliminarily priced for the Harris County Hospital District (Aa1///AA+/) $839.55 million of limited tax bonds, with 5s of 2/2028 at 3.16%, 5s of 2030 at 3.28%, 5s of 2035 at 3.70%, 5s of 2040 at 4.15%, 5s of 2045 at 4.60%, 5.25s of 2055 at 4.83% and 5s of 2055 at 4.88%, callable 2/15/2035.
Goldman Sachs priced for the California Infrastructure and Economic Development Bank (Aa3/AA//) $485.915 million of UCSF Clinical and Life Sciences Building revenue bonds, with 5s of 5/2031 at 3.00%, 5s of 2035 at 3.35%, 5s of 2040 at 3.93%, 5s of 2045 at 4.32%, 5s of 2050 at 4.56%, 4s of 2055 at 4.75% and 5.25s of 2059 at 4.65%, callable 5/15/2035.
J.P. Morgan priced for Whiting, Indiana, (A1/A-//) $200 million of non-AMT BP Products North America Inc. Project environmental facilities revenue bonds, Series 2008, with 4.2s of 6/2044 with a mandatory tender of 6/21/2035 priced at par, callable 6/2/2035.
Bank of America priced for the Idaho Housing and Finance Association (Aa1///) $175 million of taxable single-family mortgage bonds, Series B, with all bonds priced at par — 4.469s of 1/2026, 4.789s of 1/2030, 4.819s of 10/2030, 5.571s of 1/2035, 5.611s of 7/2035, 5.951s of 7/2040, 6/144s of 7/2045 and 6.194s of 7/2050 — except for 6.5s of 7/2065 at 5.269%, callable 7/1/2033.
Bank of America priced for the Indiana Finance Authority (/AA+/AA+/) $154.45 million of stadium project lease appropriation refunding bonds, Series 2025A, with 5s of 2/2026 at 3.13%, 5s of 2030 at 3.25% and 5s of 2033 at 3.44%, noncall.
In the competitive market, Clark County, Nevada, (Aa2/AA-//) sold $202.71 million of highway revenue improvement and refunding bonds to BofA Securities, with 5s of 7/2026 at 3.00%, 5s of 2030 at 3.13%, 5s of 2035 at 3.53%, 4s of 2040 at 4.15% and 4s of 2045 at 4.57%, callable 7/1/2035.
Celina, Texas, (Aa1/AA//) sold $144.91 million of tax and waterworks and sewer system revenue certificates of obligation to BofA Securities, with saw 5s of 9/2026 at 3.03%, 5s of 2030 at 3.20%, 5s of 2035 at 3.60%, 5s of 2040 at 4.03%, 4.5s of 2045 at 4.653% and 4.75s of 2050 at par, callable 9/1/2034.
Orange County, Florida, (/AAA/AAA/) sold $140.33 million of water and wastewater utility revenue bonds to BofA Securities, with saw 5s of 10/2028 at 2.94%, 5s of 2030 at 3.02%, 5s of 2035 at 3.45%, 4s of 2040 at 4.133% and 4.625s of 2045 at 4.64%, callable 10/1/2035.
AAA scales
MMD's scale was unchanged: The one-year was at 2.87% and 2.88% in two years. The five-year was at 2.96%, the 10-year at 3.31% and the 30-year at 4.40% at 3 p.m.
The ICE AAA yield curve was mixed: 2.86% (unch) in 2026 and 2.86% (-3) in 2027. The five-year was at 2.95% (-3), the 10-year was at 3.29% (-2) and the 30-year was at 4.41% (+1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.87% in 2025 and 2.88% in 2026. The five-year was at 2.97%, the 10-year was at 3.31% and the 30-year yield was at 4.39% at 4 p.m.
Bloomberg BVAL was little changed: 2.84% (unch) in 2025 and 2.89% (unch) in 2026. The five-year at 3.01% (unch), the 10-year at 3.32% (unch) and the 30-year at 4.40% (+1) at 4 p.m.
Treasuries were slightly weaker.
The two-year UST was yielding 4.021% (+1), the three-year was at 4.014% (+1), the five-year at 4.122% (+1), the 10-year at 4.494% (+2), the 20-year at 4.967% (+3) and the 30-year at 4.934% (+3) near the close.
CPI
The April consumer price index, softer than expected, provided no clarity to the markets as economists still expect tariff-related inflation bumps in the next few months.
"Unfortunately, given the overarching tariff situation, this was probably one of the least important CPI prints since the inflation spike of 2022," said Janus Henderson's Kerschner. "Inflation from the new tariffs announced on Liberation Day will not likely show up until at least next month or perhaps even June's readings."
Therefore, he added, it will be months before the market can determine the tariffs' effect on prices. "Thus, market uncertainty will likely remain elevated," Kerschner said.
"The Fed will be on hold for the foreseeable future given that inflation continues to drop and unemployment is steady," he added. The market no longer expects a June rate cut, Kerschner noted, and "July's probability [is] now only at 41%, down from nearly 100% just a couple of weeks ago."
With tariffs still hanging over the market, Alexandra Wilson-Elizondo, global co-head and co-chief investment officer of multi-asset solutions within Goldman Sachs Asset Management, said, "The final CPI figure of 2.3% YoY is likely a welcome reprieve for the Fed; however, the larger tariff-related price adjustments are likely to come over the next few months."
As a result, the Fed will stay "on the sidelines in the near term and markets will "be trading with negotiation and reconciliation headlines."
But Seema Shah, chief global strategist at Principal Asset Management, said, "It is questionable whether or not today's CPI print really moves the needle after the rollercoaster ride of the past month."
In addition to not knowing the full impact of tariffs, she said, "Inflation numbers will now be further whipsawed by the U.S./China trade truce announcement. An inflation impulse will likely come through during late Q2 but may be partially and quickly eroded if container traffic rapidly resumes in light of the drop in U.S./China tariffs."
With several months until there's clarity, Shah said, "This prolonged inflation uncertainty likely implies a prolonged Fed pause."
The report was "humdrum," said Josh Jamner, investment strategy analyst at ClearBridge Investments, "with recent trends remaining largely intact."
This report won't change Fed officials' thinking, he said, "and importantly the May CPI report will come out before the June FOMC meeting. Like the Fed, investors are likely to look through today's report as the prospect of trade deals and details on the budget reconciliation process are more material drivers for equities in the coming weeks."
The below expectation readings, Jamner said, "are welcome news for investors as the risk of an instant pass-through from tariffs appears to have been avoided."
While the report won't prompt a June rate cut, BMO Chief U.S. Economist Scott Anderson said, it "does leave open the possibility of some rate cuts later this year. Fed funds futures are now fully pricing in between two and three quarter-point rate cuts in 2025, with the first one most likely coming in September."
The data are "a win for the Fed," said Austin Schaul, head of research at Avantax. "With headline inflation easing to 2.3% — the lowest since February 2021 — Fed Chair Powell has more reason to stay patient on rate cuts."
Although the markets still expect higher inflation later this year, he said, "it's now a 'wait-and-see' posture."
Additionally, the "trade de-escalation" gives the Fed "some valuable breathing space." Schaul said. "Maybe it's not a green light for cuts just yet, but it's a foot in the door, keeping it open for action if growth slows. Even sticky shelter costs saw their pace cooling in this latest report."
Primary to come
The National Finance Authority (/A+//) is set to price Wednesday $855 million of Winston-Salem Sustainable Energy Partners revenue bonds, consisting of $769.63 million of Series A bonds, serials 2030-2035, 2041-2045, terms 2050, 2055, and $85.37 million of taxable Series B bonds, serial 2035. RBC Capital Markets.
The Black Belt Energy Gas District (/A-//) is set to price $659.2 million of gas project revenue bonds, 2025 Series A, serials 2027-2032, 2055. J.P. Morgan.
The Washington State Housing Finance Commission is set to price Thursday $519.765 million of nonprofit revenue bonds, consisting of $487.215 million of BAM-insured Series 2025A bonds (/AA//), serials 2029-2040, terms 2045, 2050, 2055, 2060, 2064, and $32.55 million of subordinate Series 2025B bonds (nonrated), term 2064. Barclays.
The New Jersey Economic Development Authority is set to price Wednesday $300 million of non-rated Repauno Port & Rail Terminal Project dock and wharf facility revenue bonds. Morgan Stanley.
Seattle (Aaa/AA+//) is set to price Wednesday $257.72 million of water system improvement and refunding revenue bonds, serials 2025-2045, terms 2050, 2055. BofA Securities.
The New Jersey Higher Education Student Assistance Authority is set to price Thursday $257.3 million of AMT student loan revenue and refunding bonds, consisting of $23.12 million of Series 1A (/AA//), serials 2027-2035; $178.88 million of Series 1B (/AA//), serials 2027-2035, term 2045; $28 million of Series 1C (/BBB//), serial 2055; and $27.3 million of Series 3 (/AA//, serials 2027-2035. RBC Capital Markets.
The Northside Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $200 million of PSF-insured variable rate unlimited tax school building bonds, Series 2020, term 2050. Baird.
The North Dakota Housing Finance Agency (Aa1///) is set to price Wednesday $200 million of non-AMT social housing finance program bonds, 2025 Series A, serials 2026-2037, terms 2040, 2045, 2050, 2053, 2056. RBC Capital Markets.
The South Carolina State Housing Finance and Development Authority (Aaa///) is set to price Wednesday $178 million of non-AMT mortgage revenue bonds, Series 2025 B, serials 2026-2037, terms 2040, 2045, 2050, 2055, 2055. BofA Securities.
The Bedford City School District, Ohio, (/AA//) is set to price Thursday $158.13 million of BAM-insured GO school improvement bonds, serials 2025-2045, terms 2050, 2055, 2058. Piper Sandler.
The Southern California Public Power Authority (/AA-/AA-/) is set to price Wednesday $138.06 million of Canyon Power Project refunding revenue bonds, consisting of $51.165 million of 2025 Series A, serials 2028-2036, and $86.895 million of 2025 Series B, term 2040. Wells Fargo.
The Waco Education Finance Corp. (/A+/AA-/) is set to price Wednesday $132.1 million of fixed-rate Baylor University issue revenue bonds, consisting of $84.315 million of tax-exempt Series 2025A bonds, serials 2031-2037, 2039-2041, 2043-2045, terms 2050, 2055, and $47.785 million of taxable Series 2025B bonds, serial 2030. BofA Securities.
The Massachusetts Development Finance Agency (/A+//) is set to price Wednesday $127 million of Brandeis University issue revenue bonds, consisting of $20 million of Series T-1, serials 2028-2035, and $107 million of Series T-2, serial 2055. Barclays.
Competitive
Nassau County, New York, (Aa2/AA/AA/) is set to sell $277.715 million of general improvement bonds, 2025 Series A, at 10 a.m. Wednesday.
The Fremont Unified School District, California, (Aa2///) is set to sell $250 million of Election of 2024 GOs, Series A, at 12:30 p.m. Thursday.
Monmouth County, New Jersey, (Aaa//AAA/) is set to sell $138.72 million of GOs at 10:45 a.m. Wednesday.
St. Lucie County, Florida, (Aa2/AA//) is set to sell $122.615 million of non-ad valorem revenue bonds, Series 2025A, at 10:30 a.m. Wednesday.
