Municipals were firmer Tuesday as U.S. Treasury yields rose and equities ended at record highs.
Muni yields were bumped up to four basis points, depending on the scale, while UST yields rose three to six basis points.
The two-year muni-UST ratio Tuesday was at 58%, the five-year at 62%, the 10-year at 73% and the 30-year at 91%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 59%, the five-year at 62%, the 10-year at 73% and the 30-year at 93% at a 4 p.m. read.
Municipals continued to strengthen on Tuesday, but with smaller gains across the curve after a two-day rally.
The muni market is in a position to rally in the latter part of this year, said Daryl Clements, a portfolio manager at AllianceBernstein.
After a lackluster jobs report, the Federal Reserve is most likely going to cut rates at its next meeting, with the market pricing in 26 basis points of cuts at the Sept. 17 meeting, followed by an additional 20 basis points of cuts at the Oct. 29 meeting. Overall, there are now 70 basis points of cuts priced in for this year, he said.
"The market is not always correct, but given how close we are to the next [Federal Open Market Committee] meeting, we are confident a rate cut will happen," Clements said.
After next week's estimated $12 billion new-issue calendar, there will likely be four straight weeks where issuance falls below $10 billion, the first time this has happened this year, Clements said.
"We have been anticipating that issuance in the back half of the year would abate, as significant issuance was pulled forward to the first half of the year to avoid any potential changes to muni tax exemption. No change occurred," he said.
There is growing demand for long bonds as "month-to-date long demand is $50 million net positive" regardless of last month's "net outflows of $370 million realized by long-duration strategies," Clements said.
"As supply declines and demand increases, the cheap long end of the muni curve is primed to rally," he said.
Last week's rally may have been the break active managers needed: "a push away from higher yields that will deliver the advertised total return and help languishing inflows look more like prior years," said Matt Fabian, a partner at Municipal Market Analytics.
Separately managed accounts have continued to dominate demand in the market, generating "325,000 trades even during last week's holiday-shortened schedule," he said, adding, this behavior would suggest the intermediate and long ends of the curve, and to an extent the whole curve, are "leashed to the income demands of the retail buyer."
"And other muni-side wideners are still in place and, reasonably, growing in importance, including: excess new issue supply (still on track to hit $575 billion to $600 billion this year and to keep rising; diminished reinvestment; ratios still too low/unattractive for sustained crossover or bank demand; and a blossoming array of credit worries (see at left), mostly stemming from D.C. policies," he said.
In the primary market on Tuesday, J.P. Morgan priced for Atlanta (Aa3/AA//AA+/) $1.017 billion of Hartsfield-Jackson Atlanta International Airport general revenue bonds. The first tranche, $49.71 million of non-AMT Series 2025A bonds, saw 5s of 7/2026 at 2.21%, 5s of 2030 at 2.35%, 5s of 2035 at 3.15%, 5s of 2040 at 3.86%, 5.25s of 2045 at 4.36%, 5.25s of 2050 at 4.53% and 5.25s of 2055 at 4.59%, callable 7/2034.
The second tranche, $918.28 million of green AMT Series 2025B-1 bonds, saw 5s of 7/2026 at 2.62%, 5s of 2030 at 2.80%, 5s of 2035 at 3.68%, 5s of 2040 at 4.29%, 5.25s of 2045 at 4.65%, 5.25s of 2050 at 4.80% and 5.5s of 2055 at 4.79%, callable 7/2034.
The third tranche, $48.845 million of AMT Series 2025B-2 bonds, saw 5s of 7/2026 at 2.62%, 5s of 2030 at 2.80%, 5s of 2035 at 3.68%, 5s of 2040 at 4.29%, 5.25s of 2045 at 4.65%, 5.25s of 2050 at 4.80% and 5.5s of 2055 at 4.79%, callable 7/2034.
Goldman Sachs priced for the Black Belt Energy Gas District (A2///) $965 million of gas project revenue bonds, Series 2025B, with 5s of 10/2035 at 4.52%, callable 7/2035.
Wells Fargo priced for Austin, Texas, (/AAA/AAA/) a $802.83 million deal. The first tranche, $381.3 million of public improvement and refunding bonds, saw 5s of 9/2026 at 2.24%, 5s of 2030 at 2.40%, 5s of 2035 at 3.22%, 5s of 2040 at 3.89% and 5s of 2045 at 4.29%, callable 9/2035.
The second tranche, $269.91 million of certificates of obligation, saw 5s of 9/2026 at 2.24%, 5s of 2030 at 2.40%, 5s of 2035 at 3.22%, 5s of 2040 at 3.89% and 5s of 2045 at 4.29%, callable 9/2035.
The third tranche, $37.49 million of public property finance contractual obligations, saw 5s of 5/2026 at 2.29%, 5s of 11/2026 at 2.29%, 5s of 5/2030 at 2.40%, 5s of 11/2030 at 2.43%, 3s of 05/2032 at 2.79% and 5s of 11/2032 at 2.83%, noncall.
Details for the fourth tranche, $84.365 million of taxable public improvement bonds, and the fifth tranche, $29.765 million taxable certificates of obligation, were unavailable.
Morgan Stanley priced for the Savannah-Georgia Convention Center Authority $396.52 million of convention center hotel revenue bonds. The first tranche, $95.5 million of Series 2025A first-tier bonds (BBB-), saw 5.25s of 6/2040 at 4.68%, 5.125s of 2050 at 5.27% and 5.25s of 2061 at 5.39%, callable 6/2035.
The second tranche, $209.58 million of non-rated Series B second-tier bonds, saw 5.5s of 06/2040 at 5.65%, 6s of 2050 at 6.30% and 6.25s of 2061 at 6.45%, callable 6/2035.
The third tranche, $91.44 million of Series C third-tier bonds (/BBB-//), saw 5s of 06/2031 at 2.95%, 5s of 2035 at 3.70%, 5s of 2040 at 4.38%, 5.5s of 2045 at 4.83%, 5.5s of 2050 at 4.90% and 5s of 2058 at 5.10%, callable 6/2035.
Barclays priced for the Mt. San Antonio Community College District, California, (Aa1/AA//) $250 million of Election of 2024 GOs. The first tranche, $230 million of Series 2025A bonds, saw 5s of 8/2026 at 1.81%, 5s of 2027 at 1.73%, 5s of 2040 at 3.56%, 5s of 2045 at 4.11%, 5s of 2050 at 4.37% and 5.25s of 2055 at 4.39%, callable 8/2035.
The second tranche, $20 million of taxable Series 2025B bonds, saw bonds priced at par: 3.77s of 8/2026, noncall.
J.P. Morgan priced for the South Carolina Association of Governmental Organizations Educational Facilities Corp. for Pickens School District (A1///) $106.68 million of installment purchase revenue refunding bonds (School District of Pickens County Project), with 5s of 12/2026 at 2.40%, 5s of 2030 at 2.54% and 5s of 2031 at 2.72%, noncall.
In the competitive market, the Clark County School District, Nevada, (A1/AA-//) sold $578.16 million of limited tax GO building and refunding bonds, Series 2025B, to Morgan Stanley, with 5s of 6/2027 at 2.25%, 5s of 2030 at 2.40%, 5s of 2035 at 3.25%, 5s of 2040 at 3.95% and 5s of 2045 at 4.44%, callable 6/2035.
The Douglasville-Douglas County Water and Sewer Authority, Georgia, (Aa2/AA//) sold $206.4 million of water and sewerage revenue bonds to Truist, with 5s of 6/2031 at 2.40%, 5s of 2035 at 3.03%, 5s of 2040 at 3.75%, 5s of 2045 at 4.55%, 5s of 2050 at 4.45% and 4s of 2055 at 4.65%, callable 6/2035.
AAA scales
MMD's scale was bumped eight years and out: The one-year was at 2.15% (unch) and 2.06% (unch) in two years. The five-year was at 2.23% (unch), the 10-year at 2.98% (-4) and the 30-year at 4.31% (-4) at 3 p.m.
The ICE AAA yield curve was bumped one to two basis points: 2.14% (-1) in 2026 and 2.07% (-2) in 2027. The five-year was at 2.23% (-2), the 10-year was at 2.97% (-2) and the 30-year was at 4.37% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped out long: The one-year was at 2.14% (unch) in 2025 and 2.06% (unch) in 2026. The five-year was at 2.23% (unch), the 10-year was at 2.98% (-3) and the 30-year yield was at 4.31% (-4) at 4 p.m.
Bloomberg BVAL was bumped up to four basis points: 2.09% (unch) in 2025 and 2.09% (unch) in 2026. The five-year at 2.19% (-1), the 10-year at 2.96% (-3) and the 30-year at 4.31% (-4) at 4 p.m.
Treasuries saw losses.
The two-year UST was yielding 3.587% (+6), the three-year was at 3.51% (+6), the five-year at 3.61% (+5), the 10-year at 4.083% (+4), the 20-year at 4.677% (+3) and the 30-year at 4.726% (+3) near the close.
Primary to come
The cities of Dallas and Fort Worth, Texas, (A1/AA-//AA/) are set to price Wednesday $1.717 billion of Dallas-Fort Worth International Airport joint revenue refunding and improvement bonds, consisting of $1.417 billion of Series 2025A-1 and $300 million of Series 2025A-2. BofA Securities.
The Chicago Board of Education (/BB+//BBB/) is set to price Thursday $650 million of unlimited tax GOs. Loop Capital Markets.
The Sullivan County Resort Facilities Local Development Corp. is set to price Thursday $561 million of nonrated tax-exempt revenue bonds. KeyBanc Capital Markets.
The Adventist Health System/West (/BBB+/BBB+/) is set to price Thursday $372.62 million of taxable corporate CUSIPs. RBC Capital Markets.
The California Health Facilities Financing Authority (/BBB+/BBB+/) is set to price Thursday $308.425 million of Adventist Health System/West fixed-mode revenue bonds, Series 2025A. RBC Capital Markets.
The cities of Dallas and Fort Worth, Texas, (A1/AA-//AA/) are set to price Wednesday $292.84 million of non-AMT Dallas Fort Worth International Airport joint revenue refunding and improvement bonds, Series 2025B. Raymond James.
The Long Beach Community College District, California, (Aa2/AA//) is set to price Wednesday $235 million of GOs, consisting of $200 million of Election of 2016 GOs, Series 2025E, and $35 million of Election of 2024 GOs, Series 2025 A-1. Raymond James.
Honolulu (/AA+/AA/) is set to price Wednesday $223.295 million of first bond resolution green senior wastewater system revenue bonds, Series 2025B. BofA Securities.
The Florida Housing Finance Corp. (Aaa///) is set to price Wednesday $150 million of non-AMT homeowner mortgage revenue bonds, Series 2025 5. BofA Securities.
Competitive
Salt Lake County, Utah, (/AAA//) is set to sell $115.055 million of sales tax revenue bonds at 11:30 a.m. Thursday.
The Boston Water and Sewer Commission is set to sell $100 million of senior general revenue bonds, Series 2025A, at 11 a.m. Thursday
