Munis were mixed in the secondary market Wednesday as the primary market took focus, with several billion-dollar deals pricing. U.S. Treasuries saw small gains and equities ended up.
The Investment Company Institute Wednesday reported inflows of $217 million for the week ending Nov. 25, following $488 million of inflows the previous week.
Exchange-traded funds saw inflows of $1.089 billion after $366 million of inflows the week prior, per ICI data.
The muni market is dealing with elevated supply this week and secondary flows have "reacted in tandem," said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital, noting secondary volume reached its highest level in two months Tuesday at $10.1 billion.
The "cycle of high supply" comes as generic yields are 40 to 60 basis points below their second-quarter closing levels, Olsan said. She sees "broad-based demand, where muni buyers have several reasons to remain engaged, even if at modest adjustments."
"There is renewed focus on optimizing taxable-equivalent yields as the broad outlook is positioning for lower yields in 2026," she said. "Given those considerations, a balance of curve extension and credit quality comes into play."
The two-year muni-UST ratio Wednesday was at 70%, the five-year at 67%, the 10-year at 68% and the 30-year at 89%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 70%, the five-year at 65%, the 10-year at 67% and the 30-year at 88% at a 4 p.m. read.
Despite 2025's volatility, MMD-UST ratios "will likely end up not far from 2024 yearend levels," Barclays analysts led by Mikhail Foux wrote, "at least for the front end."
"Going into this year, municipal bond investors were concerned about the effects of tax reform on the asset class. We were skeptical about substantial changes to the tax exemption, but also thought that municipals might lose at least some portion of the market," Barclays wrote. "Clearly, our concerns were misplaced and not only did munis not lose anything they actually added some sectors and uses."
Unlike most years, high-yield has underperformed investment-grade. The transportation and tobacco sectors dragged down overall high-yield performance, according to Barclays.
Tax-exempt munis underperformed this year, Barclays wrote, because of valuations and heavy issuance.
"Tax-exempts started the year rich relative to Treasuries, and even elevated yields (which typically attract more investors) did not justify such low ratios, in our view," Barclays wrote.
Barclays analysts are "cautiously optimistic" about 2026.
Muni investors should position themselves defensively heading into the new year, but remain optimistic, Barclays wrote. Lower rates and steeper curves will create a tailwind, while ratios should decline somewhat on the front and long ends, but likely not in the belly of the curve.
"Issuance will remain heavy and might come back with force in the first quarter, rate volatility will likely return at the start of the year and retail has started to commit more capital to the asset class, but we need to see more," Barclays analysts wrote.
Barclays doesn't foresee major policy changes in the muni sectors beyond higher education and hospitals. Additionally, its analysts expect the economy to accelerate in the first two quarters of 2026, while inflation moderates slightly.
The direction of the muni market will be determined more by the UST market than usual, according to Barclays strategists. They expect stronger performance from the UST front end, which will encourage the Federal Reserve to pick up easing and cut rates.
"Long rates should remain sticky and are expected to decline only marginally because of lingering concerns about the budget deficit, legal challenges to the current tariff regime, and a significant increase in corporate issuance that should also put pressure on long Treasuries," Barclays analysts wrote.
New-issue market
In the primary market Wednesday, Raymond James priced for Connecticut (Aa2/AA/AA/AAA/) $1.551 billion of special tax obligation bonds (transportation infrastructure purposes), Series 2025A, with 5s of 7/2026 at 2.54%, 5s of 2030 at 2.60%, 5s of 2035 at 2.92%, 5s of 2040 at 3.54%, 5s of 2045 at 4.09% and 5s of 2046 at 4.14%, callable 10/1/2035.
Goldman Sachs priced for the California Community Choice Financing Authority (Aa1///) $1.035 billion of green clean energy project revenue bonds, Series 2025G, with 5s of 12/2035 at 3.88%.
BofA Securities priced for Massachusetts (Aa1/AA+/AA+/) $1.018 billion of GOs. The first tranche, $750 million of Series 2025G bonds, saw 5s of 12/2029 at 2.50%, 5s of 2030 at 2.49%, 5s of 2035 at 2.89%, 5s of 2040 at 3.48%, 5s of 2045 at 4.06%, 5s of 2050 at 4.39% and 5s of 2055 at 4.49%, callable 12/1/2035.
The second tranche, $268.21 million of Series 2025B refunding bonds, saw 5s of 6/2027 at 2.52%, 5s of 2030 at 2.49%, 5s of 2035 at 2.86%, 5s of 2040 at 3.48%, 5s of 2045 at 4.06%, and 5s of 2046 at 4.17%, callable 6/1/2025.
RBC Capital Markets preliminarily priced for the Battery Park City Authority (Aaa/AAA/) $662.285 million of senior sustainability revenue bonds, with 5s of 11/2039 at 3.30%, 5s of 2040 at 3.47%, 5s of 2045 at 4.11%, 5s of 2050 at 4.39% and 5.25s of 2055 at 4.43%, callable 11/1/2035.
J.P. Morgan priced for the Maryland Health and Higher Educational Facilities Authority (Aa2/AA-/AA-/) $359.755 million of Johns Hopkins Health System issue revenue bonds, Series 2025A, with 5s of 5/2026 at 2.63%, 5s of 2030 at 2.70%, 5s of 2035 at 3.04%, 5s of 2040 at 3.67% and 5.25s of 2055 at 4.59%, callable 11/15/2035.
BofA Securities priced for the Pennsylvania Turnpike Commission (A1/AA-/AA-/) $206.19 million of registration fee revenue refunding bonds, with 5s of 7/2030 at 2.63%, 5s of 2035 at 3.00%, 5s of 2040 at 3.59% and 5s of 2041 at 3.71%, callable 7/15/2035.
In the competitive market, King County, Washington, (Aaa/AAA/AAA/) sold $234.17 million of limited tax GO and refunding bonds, Series B, to BofA Securities, with 5s of 12/2026 at 2.50%, 5s of 2030 at 2.53%, 5s of 2035 at 2.85%, 5s of 2040 at 3.44%, 5s of 2045 at 4.03%, 5s of 2050 at 4.29%, and 5s of 2055 at 4.39%, callable 12/1/2035.
The county also sold $119.12 million of taxable limited tax GOs, Series 2025C, to FHN Financial, with 3.271s of 12/2026 at par, 3.793s of 2030 at par, 4.125s of 2035 at 4.277%, 4.55s of 2039 at 4.727% and 4.75s of 2045 at 4.908%, callable 12/1/2035.
St. Petersburg, Florida, (Aa2//AA/) sold $131.25 million of public utility revenue bonds, Series 2025C, to BofA Securities, with 5s of 10/2027 at 2.55%, 5s of 2030 at 2.56%, 5s of 2035 at 2.92%, 5s of 2040 at 3.52%, 4.375s of 2045 at 4.35%, 4.5s of 2050 at 4.52% and 4.5s of 2055 at 4.55%, callable 10/1/2035.
The Moorestown Township Board of Education (/AA+//) sold $108.298 million of school bonds to UBS, with 1s of 8/2027 at 3.10%, 2s of 2030 at 3.25%, 4s of 2035 at 2.70%, 4s of 2040 at 3.65%, 4s of 2045 at 4.10% and 4s of 2050 at 4.31%, callable 8/1/2033.
AAA scales
MMD's scale was unchanged: 2.50% in 2026 and 2.44% in 2027. The five-year was 2.43%, the 10-year was 2.77% and the 30-year was 4.21% at 3 p.m.
The ICE AAA yield curve was bumped up to four basis points: 2.49% (-1) in 2026 and 2.45% (-2) in 2027. The five-year was at 2.39% (-4), the 10-year was at 2.76% (-2) and the 30-year was at 4.16% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.50% (unch) in 2025 and 2.44% (unch) in 2026. The five-year was at 2.43% (+1), the 10-year was at 2.77% (unch) and the 30-year yield was at 4.19% (unch) at 3 p.m.
Bloomberg BVAL was unchanged 2.50% in 2025 and 2.45% in 2026. The five-year at 2.39%, the 10-year at 2.73% and the 30-year at 4.09% at 4 p.m.
Treasuries were slightly firmer.
The two-year UST was yielding 3.485% (-3), the three-year was at 3.501% (-3), the five-year at 3.623% (-3), the 10-year at 4.058% (-3), the 20-year at 4.684% (-2) and the 30-year at 4.727% (-2) near the close.
Primary to come
The Utility Debt Securitization Authority, New York, (Aaa/AAA/AAA/) is set to price Thursday $1.026 billion of restructuring bonds, consisting of $112.03 million of Series 2025 green bonds and $914.275 million of Series 2025 TE-2 bonds. BofA Securities.
CPS Energy (Aa2/AA-/AA-/) is set to price Thursday $599.765 million of revenue refunding bonds, New Series 2026A. Jefferies.
The Oklahoma Water Resources Board (/AAA//) is set to price Thursday $261.81 million of state loan program revenue bonds, Series 2025C. BOK Financial Securities.
CSU Strata (/BB+//) is set to price Thursday $144.435 million of student housing revenue bonds (The Prospect Project), consisting of $137.15 million of Series 2025A bonds and $7.285 million of subordinate Series 2025B bonds. Morgan Stanley.
The South Carolina Jobs-Economic Development Authority (/A+//) is set to price Thursday $132.79 million of credit-enhanced residential development revenue bonds (Sixteenth Floor Obligated Group Projects), Series 2025. KeyBanc Capital Markets.
Fort Worth Independent School District (Aaa///) is set to price Thursday $131.54 million of PSF-insured unlimited tax refunding bonds, Series 2025A. BofA Securities.
The Public Finance Authority (/AA//) is set to price Thursday $120.24 million of BAM-insured student housing revenue bonds (PRG - Oxford Properties LLC Project), consisting of $117.59 million of Series 2025A and $2.65 million of Series 2025B. Raymond James.
The Eagle Mountain-Saginaw Independent School District (Aaa//AAA/) is set to price $112.775 million of PSF-insured unlimited tax refunding bonds, Series 2025-A. Mesirow Financial.
Competitive
The California Infrastructure and Economic Development Bank (Aaa//AAA/) is set to sell $554.625 million of green clean water and drinking water state revolving fund revenue bonds at 11:30 a.m. Eastern Thursday.
Jessica Lerner contributed to this report.
