Municipals weakened further Tuesday as U.S. Treasuries were little changed and equities ended up.
The two-year muni-UST ratio Tuesday was at 70%, the five-year at 66%, 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 66%, the 10-year at 68% and the 30-year at 88% at a 3 p.m. read.
Munis saw small cuts once again on Tuesday. This comes on the heels of muni yields remaining relatively unchanged throughout November "despite uncertainty regarding the reopening of the U.S. government, conflicting information from Federal Reserve policymakers and the wild swings in market sentiment regarding the prospects of another rate cut," said Tim Iltz, a fixed income credit and market analyst at HJ Sims.
Last month's stability in the fixed income markets can "partially be attributed to the lack of key economic data during the shutdown and the continuation of long-term trends with structural labor market concerns and continued stubbornly high inflation," he said.
This week, the market will "waste no time" as the new-issue calendar soars to $16 billion, said Chris Brigati, CIO and managing director of SWBC, and Ryan Riffe, SVP of capital markets at the firm.
"Attractive ratios, increased reinvestment capital, and a stronger conviction of a December rate cut should help the market absorb the larger calendar," they said.
Along with the sizable issuance this week, there are large deals already on the calendar for the next two weeks.
Next week will see $1.003 billion of Chicago O'Hare International Airport general airport senior line refunding bonds, $997.76 million of multi-family housing revenue bonds from the New York City Housing Development Corp. and $730 million of special obligation revenue bonds from Alabama Highway Authority.
A $1 billion gas supply revenue bond deal from the Texas Municipal Gas Acquisition and Supply Corp. is set to price as early as Dec. 9.
For the week of Dec. 15, the New York City Transitional Finance Authority is set to come to market with $1.3 billion of future tax-secured subordinate refunding bonds.
The typical year-end portfolio adjustments are expected to "provide a solid backdrop for continued two-way activity in the market before flows subside closer to the Christmas holiday," Brigati and Riffe said.
While investors were still debating if the Fed would hold rates steady at its December meeting just one week ago, a rate cut is now almost a certainty, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
"The Fed futures are pricing in close to 100% probability and the announcement from San Francisco Fed President Mary Daly supporting a cut only added fuel to the fire at the beginning of last week," he said.
The expected rate cut means the market's appetite for munis is likely to pick up, Kozlik said.
Flows into muni mutual funds tend to "pick up" when rate cuts are expected and December looks like it will "fit that pattern," he said.
"Strong demand is likely and fortunately dealers will have the inventory to meet it," Kozlik noted.
In the primary market Tuesday, J.P. Morgan priced for the San Francisco Airport Commission (Aa3/AA-//) $900.885 million of San Francisco International Airport second series revenue bonds. The first tranche, $847.85 million of AMT Series 2025D bonds, saw 5s of 5/2029 at 2.99%, 5s of 2030 at 3.00%, 5s of 2032 at 3.14%, 5.25s of 2055 at 4.81% and 5.5s of 2055 at 4.76%, callable 5/1/2035.
The second tranche, $53.035 million of non-AMT Series 2025E bonds, saw 5s of 8/2045 at 3.98% and 5s of 2046 at 4.06%, callable 5/1/2035.
BofA Securities priced for Monroe County Industrial Development Corp. (Aa3/AA-//) $224.495 million of revenue bonds (University of Rochester project). The first tranche, $122.515 million of non-AMT Series 2025A bonds, saw 5s of 7/2027 at 2.46%, 5s of 2030 at 2.49%, 5s of 2035 at 2.83%, 5s of 2040 at 3.48% and 5s of 2045 at 4.10%.
The second tranche, $101.98 million of taxable Series 2025B bonds, saw all bonds at par: 4.105s of 7/2030 and 4.535s of 2033.
AAA scales
MMD's scale was cut up to three basis points: 2.50% (unch) in 2026 and 2.44% (unch) in 2027. The five-year was 2.43% (+2), the 10-year was 2.77% (+2) and the 30-year was 4.21% (+2) at 3 p.m.
The ICE AAA yield curve was cut up to three basis points: 2.50% (+1) in 2026 and 2.47% (unch) in 2027. The five-year was at 2.43% (unch), the 10-year was at 2.78% (+1) and the 30-year was at 4.16% (+2) at 3 p.m.
The S&P Global Market Intelligence municipal curve was cut up to three basis points: The one-year was at 2.50% (unch) in 2025 and 2.44% (unch) in 2026. The five-year was at 2.42% (+2), the 10-year was at 2.77% (+2) and the 30-year yield was at 4.19% (+3) at 3 p.m.
Bloomberg BVAL was cut up to two basis points: 2.50% (unch) in 2025 and 2.46% (unch) in 2026. The five-year at 2.40% (+1), the 10-year at 2.74% (+1) and the 30-year at 4.09% (+1) at 3 p.m.
Treasuries were little changed.
The two-year UST was yielding 3.511% (-2), the three-year was at 3.529% (-1), the five-year at 3.656% (-1), the 10-year at 4.086% (flat), the 20-year at 4.703% (flat) and the 30-year at 4.739% (flat) at 3:15 p.m.
Primary to come
Connecticut (Aa2/AA/AA/AAA/) is set to price Wednesday $1.56 billion of transportation infrastructure purposes special tax obligation refunding bonds, Series 2025A. Raymond James.
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.
Massachusetts (Aa1/AA+/AA+/) is set to price Wednesday $1.019 billion of GOs, consisting of $750 million of Series 2025G bonds and $269.585 million of Series 2025B refunding bonds. BofA Securities.
The California Community Choice Financing Authority (Aa1///) is set to price $950 million of green clean energy project revenue bonds, Series 2025G. Goldman Sachs.
The Battery Park City Authority (Aaa//AAA/) is set to price Wednesday $662.285 million of senior revenue sustainability refunding bonds, RBC Capital Markets.
CPS Energy (Aa2/AA-/AA-/) is set to price Thursday $599.765 million of revenue refunding bonds, New Series 2026A. Jefferies.
The Maryland Health and Higher Educational Facilities Authority (Aa2/AA-/AA-/) is set to price Wednesday $335.115 million of revenue bonds (The Johns Hopkins Health System Issue), Series 2025A. J.P. Morgan.
Oakland (Aa2/AA-//) is set to price Wednesday $333.99 million of Measure U GO bonds, consisting of $94.26 million of tax-exempt Series 2025B-1 bonds, $48.94 million of tax-exempt Series 2025 Refunding bonds, $180.745 million of taxable Series 2025B-2 bonds, and $10.045 million of taxable Series 2025B-3 bonds.
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.
The Pennsylvania Turnpike Commission (A1/AA-/AA-/) is set to price Wednesday $206.595 million of motor vehicle registration fee revenue bonds, Series 2025. BofA Securities.
The North Dakota Housing Finance Agency (Aa1///) is set to price Wednesday $185 million of non-AMT housing finance program social bonds (Home Mortgage Finance Program), Series 2025C. RBC Capital Markets.
Ohio (Aa1/AA+/AA+/) is set to price Wednesday $173.82 million of tax-exempt capital facilities lease-appropriation bonds, consisting of $89.59 million of mental health facilities improvement fund projects, Series 2025A; $58.055 million of parks and recreation improvement fund projects refunding bonds, Series 2025A; and $26.175 million of adult correctional building fund projects refunding bonds, Series 2025C. Jefferies.
The Summit County Development Finance Authority (/AA//) is set to price Wednesday $157.595 million of BAM-insured student housing revenue bonds (PRG - Akron Properties LLC - The University of Akron Project), consisting of $157.305 million of Series 2025A bonds and $209,000 of taxable Series 2025B bonds. RBC Capital Markets.
The Arkansas Development Finance Authority (/AAA/AAA/) is set to price Wednesday $150 million of revolving loan fund revenue bonds, Series 2026. Stephens Inc.
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.
Irving Independent School District (/AAA//) is set to price Wednesday $118.655 million of PSF-insured unlimited tax refunding bonds. BOK Financial Securities.
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.
King County, Washington, (/AAA//) is set to sell $234.170 million of limited tax GOs and refunding bonds, Series 2025B, at 10:45 a.m. Wednesday, and $118.035 million of taxable limited tax GOs, Series 2025C, at 11:15 a.m. on Wednesday.
St. Petersburg, Florida, (Aa2//AA/) is set to sell $127.940 million of public utility revenue bonds, Series 2025C, at 10:30 a.m. Wednesday.
The Moorestown Township Board of Education is set to sell $108.298 million of school bonds at 11 a.m. Wednesday.
