Municipals were mixed Wednesday as U.S. Treasury yields rose and equities ended mixed.
The two-year ratio Wednesday was at 71%, the five-year at 71%, the 10-year at 73% 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.
The Investment Company Institute Wednesday reported $787 million of inflows for the week ending May 7, following $509 million of outflows the previous week.
Exchange-traded funds saw inflows of $680 million after $2.426 billion of inflows the week prior, per ICI data.
While April was a challenging month for muni performance, this summer will be a more supportive environment, said Mark Paris, chief investment officer and head of municipals at Invesco.
The market is heading toward the summer months of June, July and August, during which time the seasonality of municipals "deals with reinvestment coming in, bonds maturing and being called during that time, and coupon payments being made then as well," said Bryan Derdenger, a managing director and negotiated underwriter at Baird.
"That is very supportive to the marketplace during that time, barring any kind of extra externality and volatility," he said.
"Seasonal issues — triggered in April when investors tend to sell munis in non-qualified accounts to pay taxes — are giving way to better technicals, including higher demand in the coming months," Paris said.
"The seasonality indicator is positive, as May has been municipals' second strongest month of the year," according to a Municipal Market Analytics report from Tripp Kaiser and Kevin McGuigan.
"May through August, despite June's weakness, has been a historically strong four-month period for the municipal market," the report noted.
Though recent muni-USTs have pulled back since the spike in mid-April, "ratios still represent significant value compared to recent years," Paris said.
While the muni market has recently outperformed the Treasury market, there is still plenty of "stored value" in munis, said Daryl Clements, a portfolio manager at AllianceBernstein.
The historically attractive valuations seen in early April did not last long, he said.
"So while munis may not be as cheap as they were relative to USTs back on April 9, they remain very cheap relative to the long-term average," Clements said.
With summer cashflows hitting the market on June 1, the muni market may continue its relative outperformance, he said.
And while muni yields were mixed on Wednesday, yields remain very high, he said.
"Outside of brief periods in 2022/2023, investors need to go back to 2008/2009 to find periods with a higher yield environment," Clements said.
In addition, the muni yield curve remains steep, as robust issuance has led to the steepening yield curve, he said.
At some point, the long end of the curve will flatten, causing potential outperformance, Clements said.
In the primary market Wednesday, Jefferies priced and repriced for institutions for the New York City Transitional Finance Authority's (Aa1/AAA/AAA/) $1.154 billion of future tax secured subordinate bonds. The first tranche, $650 million of tax-exempt Fiscal 2025 Series I, Subseries I-1 bonds, saw 5s of 5/2041 at 4.23%, 5s of 2045 at 4.55%, 5s of 2050 at 4.76% and 5.25s of 2055 at 4.78%, callable 5/15/2035.
The second tranche, $482.275 million of tax-exempt Fiscal 2025 Series J, Subseries J-1 refunding bonds, saw 5s of 11/2027 at 3.04%, 5s of 2030 at 3.18%, 5s of 2035 at 3.59% and 5s of 2036 at 3.72%, callable 5/1/2035.
The third tranche, $20.82 million of tax-exempt Fiscal 2025 Series K refunding bonds, saw 5s of 11/2025 at 2.95%, 5s of 2030 at 3.18%, 5s of 2035 at 3.59% and 5s of 2036 at 3.73%, callable 5/1/2035.
Details for the $300 million of taxables Fiscal 2025 Series I, Subseries I-2 bonds and $40.615 million of taxable Fiscal 2025 Series J, Subseries J-2 bonds were unavailable as of 3:30 p.m.
RBC Capital Markets preliminarily priced for institutions the Dormitory Authority of the State of New York's (Aa3//AA-/) $1.037 billion of school districts revenue bond financing program revenue bonds. The first tranche, $988.035 million of Series A, saw 5s of 10/2026 at 3.10%, 5s of 2030 at 3.27%, 5s of 2035 at 3.72%, 5s of 2040 at 4.22%, 4.5s of 2045 at 4.72% and 5s of 2052 at 4.79%, callable 10/1/2034.
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.
RBC Capital Markets preliminarily priced for the National Finance Authority (/A+//) $855 million of Winston-Salem Sustainable Energy Partners revenue bonds. The first tranche, $769.63 million of Series A bonds, saw 5s of 6/2030 at 3.66%, 5s of 6/2035 at 4.16%, 5s of 12/2035 at 4.17%, 5.25s of 6/2041 at 4.76%, 5.25s of 6/2045 at 5.07%, 5.5s of 6/2050 at 5.18%, 5s of 6/2055 at 5.28% and 5.5s of 6/2055 at 5.25%, callable 6/1/2035.
Details for the second tranche, $85.37 million of taxable Series B bonds, were unavailable as of 3:30 p.m.
BofA Securities priced for Seattle (Aaa/AA+//) $231.165 million of water system improvement and refunding revenue bonds, with 5s of 5/2026 at 2.93%, 5s of 2030 at 3.04%, 5s of 2035 at 3.42%, 5s of 2040 at 3.96%, 5s of 2045 at 4.38%,5s of 2050 at 4.57% and 5s of 2055 at 4.64%, callable 5/1/2035.
Wells Fargo priced for the Southern California Public Power Authority $138 million of Canyon Power Project refunding revenue bonds. The first tranche, $51.235 million of 2025 Series A, saw 5s of 7/2028 at 3.01%, 5s of 2030 at 3.10%, 5s of 2035 at 3.69% and 5s of 2036 at 3.88%, callable 7/1/2030.
The second tranche, $87.03 million of 2025 Series B, saw 3.7s of 7/2040 with a mandatory tender of 7/1/2027 price at par, callable 1/1/2027.
Barclays priced for the Massachusetts Development Finance Agency (A2/A+//) $134.57 million of Brandeis University issue revenue bonds. The first tranche, $21.66 million of Series T-1, saw 5s of 10/2028 at 3.18%, 5s of 2030 at 3.30% and 5s of 2035 at 3.77%, noncall.
The second tranche, $112.91 million of Series T-2, saw 5s of 10/2055 with a mandatory tender of 10/1/2035 at 4.00%, callable 10/1/2035.
In the competitive market, Nassau County, New York, (Aa2/AA/AA/) sold $277.715 million of general improvement bonds, 2025 Series A, to BofA Securities, with 5s of 4/2026 at 2.82%, 5s of 2030 at 2.89%, 5s of 2035 at 3.26%, 5s of 2040 at 3.90%, 4s of 2045 at 4.52%, 5s of 2049 at 4.51% and 5s of 2055 at 4.60%, callable 4/1/2035.
St. Lucie County, Florida, (Aa2/AA//) sold $124.44 million of non-ad valorem revenue bonds, Series 2025A, to Baird, with 5s of 11/2028 at 3.02%, 5s of 2030 at 3.09%, 5s of 2035 at 3.244%, 5s of 2040 at 3.93%, 4.5s of 2045 at 4.52%, 4.625s of 2050 at 4.68% and 4.625s of 2055 at 4.72%, callable 10/1/2035.
AAA scales
MMD's scale was mixed: The one-year was at 2.85% (-2) and 2.86% (-2) in two years. The five-year was at 2.94% (-2), the 10-year at 3.31% (unch) and the 30-year at 4.43% (+3) at 3 p.m.
The ICE AAA yield curve was cut up to three basis points: 2.87% (unch) in 2026 and 2.86% (unch) in 2027. The five-year was at 2.96% (+1), the 10-year was at 3.30% (+1) and the 30-year was at 4.43% (+2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was mixed: The one-year was at 2.85% (-2) in 2025 and 2.86% (-2) in 2026. The five-year was at 2.94% (-3), the 10-year was at 3.32% (+1) and the 30-year yield was at 4.42% (+3) at 4 p.m.
Bloomberg BVAL was cut up to three basis points: 2.84% (unch) in 2025 and 2.89% (unch) in 2026. The five-year at 3.00% (unch), the 10-year at 3.33% (+1) and the 30-year at 4.42% (+3) at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 4.054% (+5), the three-year was at 4.053% (+6), the five-year at 4.166% (+7), the 10-year at 4.535% (+7), the 20-year at 5.001% (+6) and the 30-year at 4.973% (+7) near the close.
Primary to come
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 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 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.
Competitive
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.
