Munis were steady to slightly cheaper in spots Monday, as U.S. Treasuries were firmer and equities ended up.
The two-year muni-UST ratio Monday was at 59%, the five-year at 60%, the 10-year at 66% and the 30-year at 91%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 61%, the five-year at 61%, the 10-year at 65% and the 30-year at 90%, according to ICE Data Services.
The muni market contended with a volatile first week of March, as war in the Middle East led to a significant selloff for the asset class, said Jason Wong, vice president of municipals at AmeriVet Securities.
Muni yields rose in sympathy with UST yields, as part of a broader selloff in the fixed-income markets, he said.
Rising oil prices and renewed inflation concerns pushed UST yields higher, and in conjunction, munis followed suit early in the week, Wong said.
Many muni participants stayed on the sidelines to start last week due to "the sudden about-face in the Treasury market and uncertainty over how long-lasting the incursion would be," Birch Creek strategists said.
"Not wanting to make any brash decisions," customer buys and sells were down 15% to 22% on Monday, March 2, they said, citing a J.P. Morgan report. Bids wanteds rose 32%, but the hit ratio fell 26% as liquidity quickly dried up, they said.
A similar theme happened Tuesday as the new issue market started opening for orders, Birch Creek strategists said.
"With ratios compressed in the short to intermediate tenors, investors found comfort in a barbell approach where they could hide out in the front end, while taking advantage of the steepness of the curve by moving out to longer maturities where valuations are the most compelling," they said.
In the secondary markets, "BWIC volumes began to normalize, but the hit rate continued to be poor, at [negative] 15%," Birch Creek strategists said.
MMD's scale was cut 10 basis points out to 15 years Tuesday, the largest selloff since the April tariff tantrum, they said.
As investors accepted the "new normal," the tone improved for the remainder of the week, with MMD yields unchanged Wednesday and Thursday and seeing only "modest" cuts of one to two basis points in eight to 21 years on Friday, Birch Creek strategists said.
"The focus shifted back to the supply/demand imbalance due to heavy inflows and pent-up cash that needed to be invested as inquiries built to try to take advantage of a suddenly cheaper market," they said.
Last week's volatility felt "relatively orderly" as inflows remained supportive, said Daryl Clements, a municipal portfolio manager at AllianceBernstein.
Investors added $1.441 billion to muni mutual funds last week, marking the 15th straight week of positive fund flows, according to LSEG Lipper.
Investors have added $18.4 billion to the market year-to-date, Clements noted.
"This demand has been a key catalyst in municipal outperformance this year, with short and intermediate maturity after-tax spreads tightening upwards of 31 bps," he said.
Supply picks up this week, with around $13 billion expected to price, he said.
"In the event heavy new-issue supply injects periodic volatility, it can provide investors with an attractive opportunity to enter the market or add to their exposure at more attractive valuations," Clements said.
The market enters a "typically weak spring environment" due to lower reinvestment cash, increased supply, and tax-related withdrawals, and investors will likely remain somewhat cautious over the coming weeks, Birch Creek strategists said.
To get off the sidelines, they suspect the focus will be on "new issues priced at a concession and volatile days where liquidity providers can pick up bonds 10bps+ cheaper than prior levels," they said.
New-issue market
In the competitive market Monday, the Rosemount-Apple Valley-Eagan School District, Minnesota, (Aa1///) sold $145.7 million of GO school building and refunding bonds to BofA Securities, with 5s of 2/2027 at 2.22%, 5s of 2031 at 2.35%, 5s of 2036 at 2.80%, 4s of 2041 at 3.75%, 4.25s of 2046 at par, callable 2/1/2034.
AAA scales
MMD's scale was cut up to three basis points: 2.12% (unch) in 2027 and 2.13% (unch) in 2028. The five-year was 2.25% (unch), the 10-year was 2.71% (+1) and the 30-year was 4.29% (+3) at 3 p.m.
The ICE AAA yield curve was cut up to two basis points: 2.15% (unch) in 2027 and 2.18% (unch) in 2028. The five-year was at 2.30% (+1), the 10-year was at 2.72% (+2) and the 30-year was at 4.30% (+2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut up to two basis points: The one-year was at 2.12% (unch) in 2027 and 2.13% (unch) in 2028. The five-year was at 2.25% (unch), the 10-year was at 2.68% (+1) and the 30-year yield was at 4.28% (+2) at 3 p.m.
Bloomberg BVAL was cut up to two basis points: 2.14% (unch) in 2027 and 2.14% (unch) in 2028. The five-year at 2.23% (+1), the 10-year at 2.66% (+1) and the 30-year at 4.21% (+2) at 4 p.m.
U.S. Treasuries were firmer.
The two-year UST was yielding 3.549% (-1), the three-year was at 3.563% (-3), the five-year at 3.686% (-4), the 10-year at 4.097% (-4), the 20-year at 4.688% (-4) and the 30-year at 4.716% (-4) near the close.
Primary to come
The New York Dormitory Authority (Aa1///AAA/) is set to price Tuesday $2.575 billion of general purpose state personal income tax revenue bonds, consisting of $2.528 billion of tax-exempt Series 2026A bonds and $47.495 million of taxable Series 2026B bonds. Ramirez.
California (Aa2/AA-/AA/) is set to price Wednesday $2.387 billion of various purpose GOs, consisting of $1.4 billion of new-issue bonds and $987.435 million of refunding bonds. RBC Capital Markets.
Chicago (/BBB/BBB+/BBB+/) is set to price Tuesday $800.29 million of GOs, consisting of $481.94 million of taxable Series 2026A bonds, $17.39 million of Series 2026B bonds, $28.47 million of Series 2026C bonds, $116.81 million of Series 2026D bonds, $115.985 million of Series 2026E bonds, $13.505 million of Series 2026F bonds and $26.19 million of taxable Series 2026G bonds. BofA Securities.
The Minnesota Municipal Gas Agency (Baa1///) is set to price $750 million of gas project revenue bonds, Series 2026A. J.P. Morgan.
The University of Connecticut (Aa2/AA-/AA//) is set to price Tuesday $432.305 million of GO refunding bonds, 2026 Series A. RBC Capital Markets.
Ohio (Aaa/AAA/AAA//) is set to price Tuesday $362.95 million of common schools GOs, Series 2026A; $60 million of taxable third frontier research development GOs, Series 2026A; and $36 million of taxable higher education GOs, Series 2026A. Loop Capital Markets.
The Texas Transportation Commission (Aaa/AAA/AAA//) is set to price Wednesday $250 million of GO mobility fund put remarketing bonds, Series 2014-B. FHN Financial.
The University of Texas System Board of Regents (Aaa/AAA/AAA/) is set to price Wednesday $250 million of revenue financing system bonds, Series 2026B, Subseries 2026B-1. Morgan Stanley.
The University of Vermont and State Agricultural College (Aa3/A+//) is set to price Tuesday $221.365 million of GOs, Series 2026A. BofA Securities.
The Los Angeles Municipal Improvement Corp. (A1//AA/) is set to price Tuesday $216.135 million of lease revenue refunding bonds (Capital Equipment and Real Property), Series 2026-A. Barclays.
Jacksonville, Florida, (/AA/AA+/) is set to price Tuesday $129.595 million of transportation refunding revenue bonds. Raymond James.
The Buffalo Municipal Water Finance Authority (A1///) is set to price Wednesday $127.485 million of bonds, consisting of $85.68 million of Series 2026A and $41.805 million of Series 2026B. FHN Financial.
The Florida Development Finance Corp. is set to price Thursday $120 million of nonrated AMT solid waste disposal revenue remarketing bonds (Waste Pro USA, Inc. Project), Series 2023. Barclays.
The Missouri Public Utilities Commission is set to price Thursday $110 million of interim construction notes, Series 2026. D.A. Davidson.
The New York State Mortgage Agency (Aa1///) is set to price Wednesday $107.425 million of social homeowner mortgage revenue bonds, consisting of $88.655 million of non-AMT Series 274 bonds and $18.77 million of AMT Series 275 bonds. RBC Capital Markets.
The Clark-Pleasant Community School Corp. Building Corp. (/AA+//) is set to price Wednesday $106.295 million of ad valorem property tax first mortgage bonds. Stifel.
Competitive
The Omaha Metropolitan Utilities District, Nebraska, (Aa2/AA+//) is set to sell $268.415 million of water system revenue and refunding bonds at 11 a.m. Eastern Wednesday.
Westchester County, New York, is set to sell $250.306 million of GOs, 2026 Series A, at 11 a.m. Wednesday.
Baltimore County (Aaa/AAA/AAA/) is set to sell $184 million of consolidated public improvement bonds, at 10:15 a.m. Tuesday; $116.65 million of GO metropolitan district refunding bonds, at 11:15 a.m. Tuesday; $90 million of 87th issue metropolitan district bonds at 10:45 a.m. Tuesday; and $69.84 million of consolidated public improvement refunding bonds, at 11:45 a.m. Tuesday.
Albany, New York, is set to sell $142.939 million of bond anticipation notes, at 11 a.m. Tuesday.
