Munis were steady Monday ahead of this week's Federal Open Market Committee meeting, as longer-maturity U.S. Treasuries were a touch richer and equities ended up.
The two-year muni-UST ratio Monday was at 61%, the five-year at 60%, the 10-year at 63% and the 30-year at 89%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 62%, the five-year at 59%, the 10-year at 63% and the 30-year at 88%, according to ICE Data Services.
This week is poised to be "uneventful" due to the FOMC meeting, with the Federal Reserve expected to hold rates steady, said J.P. Morgan strategists led by Peter DeGroot.
Issuance this week is at $3.56 billion, a drop from the robust supply of the previous week, according to LSEG.
"We attribute the pause to issuers looking to side-step the FOMC meeting and low investment capital in the final week of [the] month, in anticipation of stronger February reinvestment," J.P. Morgan strategists said.
"While the decision to avoid bringing bonds to market next week looks to be sub-optimal today, we note that issuers had no way of foreseeing the consensus that has formed around the outcome of the Fed meeting or the considerable inflows that have resulted in spread tightening through the intermediate portions of the curve," they said.
Munis were steady Monday following the large cuts the asset class saw last week, specifically on Tuesday, Jan. 20.
On the week, the long-end saw the largest cuts — seven to nine basis points — while the front-end was cut two to three basis points, said Jason Wong, vice president of municipals at AmeriVet Securities.
The sell-off in munis — which was short-lived —resulted from "geopolitical tensions between the U.S. and Europe regarding Greenland, which sent Treasury yields higher and munis followed suit, he said.
All of the losses happened during Tuesday's "sloppy session," with some carryover into Wednesday morning before President Donald Trump announced that he would not use force to acquire Greenland nor would he impose tariffs to pressure a move, Birch Creek strategist said.
"However, even on Tuesday, the weakness was seen early on from [exchange-traded fund] market makers as investor redemptions led to a flurry of BWICs and sloppy trade prints, off as much as 15- 20 bps," they said.
By midday, though, "after investors had a chance to digest the news, the pressure subsided and dip buyers began entering the market," Birch Creek strategists said.
With Trump "backtracking on his tariffs threats related to Greenland," muni should rally once more, Wong said.
Muni mutual funds with "large cash buffers" from strong recent inflows had no real reason to sell, Birch Creek strategists said.
Inflows were again sizable last week, with $993.6 million added to mutual funds, according to LSEG Lipper.
Nearly $5 billion has flowed into mutual funds so far in January, making this the heaviest January since 2021, when inflows neared $9 billion, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
"Going forward, we expect demand to remain steady-to-strong but sometimes demand drops off at the end of the first quarter, partially due to tax-time," he said.
Overall, BWICs fell 19% compared to the recent five-week average, Birch Creek strategists said, citing J.P. Morgan.
"New issues saw decent subscriptions, particularly out to 20 years, though long duration buyers continued to be harder to find," they said.
A $724 million A-rated healthcare deal (Maryland Health and Higher Educational Facilities Authority on behalf of MedStar Health) was mostly one to five times oversubscribed, seeing the best interest in the 15-year range, but longest bonds in 25-year and 28-year had to be "reallocated" to shorter maturities to get done, Birch Creek strategists said.
An $825 million AA-plus New York City Municipal Water Finance Authority deal priced almost entirely in 30-year but "had to print with wider spreads to get done as the 5s came at +44," they said.
In the competitive market Monday, the Milwaukee Metropolitan Sewerage District, Wisconsin, (Aa1/AA+/AAA/) sold $112 million of general obligation sewerage system bonds, Series 2026A, to Huntington Securities, with 5s of 10/2027 at 2.23%, 5s of 2031 at 2.34%, 5s of 2036 at 2.81%, 4s of 2041 at 3.57% and 4.25s of 2046 at par, callable 10/1/2033.
AAA scales
MMD's scale was bumped up to a basis point: 2.20% (-1) in 2027 and 2.20% (-1) in 2028. The five-year was 2.27% (-1), the 10-year was 2.65% (-1) and the 30-year was 4.29% (unch) at 3 p.m.
The ICE AAA yield curve was unchanged: 2.22% in 2027 and 2.21% in 2028. The five-year was at 2.25%, the 10-year was at 2.69% and the 30-year was at 4.23% at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.20% (-2) in 2027 and 2.21% (-1) in 2028. The five-year was at 2.28% (-1), the 10-year was at 2.70% (unch) and the 30-year yield was at 4.24% (unch) at 3 p.m.
Bloomberg BVAL was bumped up to a basis point: 2.25% (-1) in 2027 and 2.22% (-1) in 2028. The five-year at 2.23% (-1), the 10-year at 2.63% (-1) and the 30-year at 4.16% (unch) at 4 p.m.
Treasuries were slightly richer out long.
The two-year UST was yielding 3.593% (flat), the three-year was at 3.658% (flat) the five-year at 3.822% (flat), the 10-year at 4.212% (-1), the 20-year at 4.764% (-2) and the 30-year at 4.804% (-2) near the close.
Primary to come
The Florida Development Finance Corp. (/A-/A/) is set to price Tuesday $369.295 million of healthcare facilities revenue bonds (Tampa General Hospital Project), consisting of $285.33 million of Series 2026A and $83.965 million of 2026B. J.P. Morgan.
The Miami-Dade County Industrial Development Authority is set to price Tuesday $245.99 million of student housing revenue bonds (PRG - Casa Properties LLC Project), consisting of $230.11 million of Series 26A-1 bonds (/BB+//), $1.485 million of Series 26A-2 bonds (/BB+//) and $14.395 million of Series 26B (nonrated). KeyBanc Capital Markets.
Yonkers, New York, is set to price Tuesday a $176.7 million deal, consisting of $87.355 million of Series 2026A GO serial bonds (A2/A+//), $25.27 million of Series 2026B school serial bonds (Aa3/A+//), $7.045 million of Series 2026C taxable GOs (A2/A+//) and $57.03 million of Series 2026D GO refunding bonds (A2/A+//). Raymond James.
The Maine State Housing Authority (Aa1/AA+//) is set to price Tuesday $107.11 million of social mortgage purchase bonds, 2026 Series A. BofA Securities.
The Public Finance Authority is set to price Thursday $100 million of AMT revenue bonds (Sky Harbour Capital III LLC Aviation Facilities Project). Barclays.
Competitive
Triborough Bridge and Tunnel Authority is set to sell $300 million of payroll mobility tax bond anticipation notes, Subseries 2026A-1, at 10:15 a.m. Eastern Thursday, and $450 million of payroll mobility tax bond anticipation notes, Subseries 2026A-2, at 11:45 a.m. Thursday.
