Munis were steady Wednesday as U.S. Treasuries cheapened and equities ended up.
The two-year muni-UST ratio Wednesday was at 60%, the five-year at 61%, the 10-year at 66% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 61%, the five-year at 62%, the 10-year at 66% and the 30-year at 90%, according to ICE Data Services.
The Investment Company Institute Wednesday reported inflows of $2.21 billion for the week ending Feb. 25, following $1.938 billion of inflows the previous week.
Exchange-traded funds saw inflows of $464 million after $53 million of inflows the week prior, per ICI data.
The Iran conflict has driven financial markets over the past few days, and the muni market has seen some "knock-on" effects, but they may be more macro than micro, said Nick Venditti, head of municipal fixed income at Allspring.
From a micro perspective, the muni market is in a good place, whereas from a macro perspective, financial markets are dealing with war-induced inflation spikes that negatively impact bond markets and equities, he said.
The muni selloff accelerated Tuesday as the high-grade muni curve bear flattened, with short and intermediate yields cut 10 basis points and long-end yields higher by five basis points, said J.P. Morgan strategists led by Peter DeGroot.
"These were the largest single-day cuts in the belly since April 2025, amid continued higher Treasury yields (though staging a partial midday recovery), and with narrowly based outflows from passive [exchange-traded funds]," they said.
Despite these ETF outflows, muni investors should be "well-funded" amid the March 1 reinvestment of $21 billion and solid inflows to start the month, J.P. Morgan strategists said.
Therefore, they expected a more "orderly" muni market Wednesday, given relative stability in Treasury market rates.
Munis got a little "defensive" to start the week, as in addition to the conflict in the Middle East, there was "noise" with respect to private credit, particularly the crisis facing Blue Owl Capital, and the United Kingdom mortgage lender firm MFS headlines, said Jeff MacDonald, EVP and head of fixed income strategies at Fiduciary Trust International.
"It's a conservative investor base and they responded accordingly," he said of munis.
However, with USTs stable and the "snoozer" of economic data, the muni market has settled, with muni yields little changed Wednesday, MacDonald said.
"The market is still cautious, but it feels better and is more active. I don't know if it's moved on, because the situation certainly isn't resolved, but the initial sort of shock and reaction of what's going on with oil, and what's going on with rates, and are we going to be in a recession … was part of the original price action," he said.
However, the primary seems open and deals appear to be doing pretty well, although a few still have balances, but nothing "extreme," according to MacDonald.
Technicals will drive some of the price performance this year, he said.
"We've got geopolitical risk, which makes investors a little bit skittish, and [the market] is at a part in the calendar that isn't historically very supportive for municipals. March is usually one of the worst-performing months. So could the market get a little bit — or stay — cheaper ratio-wise, spread-wise I think, so … March maybe isn't the month that it happens, just again given all those factors," MacDonald said.
New-issue market
In the primary market Wednesday, Jefferies priced for the Triborough Bridge and Tunnel Authority (/AA+//AA+/) $763.985 million of payroll mobility tax senior lien refunding bonds, Subseries 2026A-1, with 5s of 11/2030 at 2.27%, 5s of 2031 at 2.36%, 5s of 2036 at 2.92%, 5s of 2041 at 3.49%, 5s of 2046 at 4.16%, 4.375s of 2051 at 4.558% and 5s of 2056 at 4.59%, callable 5/15/2036.
J.P. Morgan priced for the University of Texas System Board of Regents (Aaa/AAA/AAA/) $388.505 million of permanent university fund bonds, Series 2026A, with 5s of 7/2027 at 2.16%, 5s of 2031 at 2.37%, 5s of 2036 at 2.89% and 5.25s of 2041 at 3.42%, noncall.
Wells Fargo priced for Auburn University (Aa2/AA//) $164 million of general fee revenue bonds, with 5s of 6/2027 at 2.19%, 5s of 2031 at 2.44%, 5s of 2036 at 2.93% and 5s of 2041 at 3.45%, callable 6/1/2036.
J.P. Morgan priced for the Kentucky Turnpike Authority (Aa2//AA-/) $102.535 million of economic development road revenue refunding bonds (revitalization projects), 2026 Series A, with 5s of 7/2026 at 2.17%, 5s of 2031 at 2.45% and 5s of 2036 at 2.96%, noncall.
In the competitive market, Cambridge, Massachusetts, (Aaa/AAA/AAA/) sold $144.42 million of GO municipal purpose loan bonds, to BofA Securities, with 5s of 2/2027 at 1.87%, 5s of 2031 at 2.00% and 5s of 2036 at 2.43%, noncall.
AAA scales
MMD's scale was unchanged: 2.12% in 2027 and 2.13% in 2028. The five-year was 2.25%, the 10-year was 2.68% and the 30-year was 4.26% at 3 p.m.
The ICE AAA yield curve was little changed: 2.15% (unch) in 2027 and 2.16% (unch) in 2028. The five-year was at 2.26% (unch), the 10-year was at 2.66% (unch) and the 30-year was at 4.25% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut up to a basis point: The one-year was at 2.12% (+1) in 2027 and 2.13% (+1) in 2028. The five-year was at 2.24% (+1), the 10-year was at 2.64% (+1) and the 30-year yield was at 4.26% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.14% in 2027 and 2.14% in 2028. The five-year at 2.22%, the 10-year at 2.63% and the 30-year at 4.18% at 4 p.m.
U.S. Treasuries saw losses.
The two-year UST was yielding 3.544% (+4), the three-year was at 3.549% (+3), the five-year at 3.672% (+3), the 10-year at 4.087% (+3), the 20-year at 4.671% (+2) and the 30-year at 4.721% (+2) near the close.
Primary to come
The California Community Choice Financing Authority (A3///) is set to price $900 million of green clean energy project revenue bonds. Goldman Sachs.
The Lamar Consolidated Independent School District (Aaa/AAA//) is set to price Thursday $545 million of PSF-insured unlimited tax schoolhouse bonds. RBC Capital Markets.
The National Finance Authority is set to price Thursday $194.202 million of social affordable housing certificates, consisting of $161.752 million of Series 2026A-1 and $32.45 million of Series 2026A-2. Wells Fargo.
The New Hampshire Health and Education Facilities Authority (Aa3/AA//) is set to price Thursday $149.045 million of BAM-insured University System of New Hampshire issue revenue bonds. RBC Capital Markets.
Competitive
Las Vegas (Aa2/AA+//) is set to sell $109.84 million of limited tax GO city hall refunding bonds, Series 2026C, at 11:30 a.m. Thursday.
North Hempstead, New York, is set to sell $101.919 million of GO bond anticipation notes, Series 2026A, at 11:15 a.m. Thursday.
