Munis were steady Monday as U.S. Treasury yields edged higher and equities ended up.
The two-year muni-UST ratio Monday was at 69%, the five-year at 65%, the 10-year at 66% and the 30-year at 88%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 64%, the 10-year at 67% and the 30-year at 87% at a 4 p.m. read.
Following the September/October rally, munis have been relatively steady in November and December, with direction and magnitude of rate change in the UST market driving underperformance or outperformance, said J.P. Morgan strategists led by Peter DeGroot.
Since Nov. 6, 10-year UST bonds have ranged from 4.0%-4.19%, while the 10-year MMD yield has moved only two basis points from 2.75%-2.77%.
The lack of volatility in the muni market continued last week, as investors have mostly ignored the small daily UST movements, which have traded relatively rangebound, Birch Creek strategists said.
The AAA MMD curve was unchanged except for maturities between 2026 and 2028, which saw yields bumped two basis points.
In the investment-graded space, "similar themes persisted, with [bid wanted] volumes rising as investors looked to raise cash before liquidity wanes over the next two weeks," Birch Creek strategists said.
Customer sale lists rose 41% last week compared to recent averages, with 20-year-plus paper increased 64%, they said, citing J.P. Morgan data.
"That said, dealers have reported several inquiries across a variety of customer types, which has helped absorb the supply," Birch Creek strategists said.
"Helping drive some of this inquiry is continued fund flows into the IG space, especially IG [exchange-traded funds], which saw +$522 million and only partially offset by the $138 million in outflows from open-end IG funds," they said.
In the high-yield market, things were a "bit choppy," as Brightline Florida, one of the largest issuers, "stole the show," Birch Creek strategists said.
The Opco bonds (originally rated BBB- in 2024) saw their first "sizable trade print" in a month, with blocks going away at $72 versus an $83 eval, they said.
The next day, the company disclosed on EMMA that it would need to
On Friday,
"While the problems facing Brightline are unique to the enterprise, the concern across the market is the knock-on effect it may have as investors pull cash from mutual funds that were heavily invested in these one-off names that have seen large markdowns and, in turn, caused poor performance this year," Birch Creek strategists said.
Overall, the muni market is ending 2025 on a "solid note," J.P. Morgan strategists said.
"As the new issue market fades into the holiday season, we do not think investors should chase current fully valued levels," they said.
Given the "sizeable outperformance in higher beta assets" since the summer, J.P. Morgan strategists think investors would "do well to pare some risk while these better technical conditions permit."
Opportunities to add "risky assets (short-calls, 4's, and zeros) at cheaper levels later in the first quarter of 2026" will appear amidst expected rate volatility and a more challenging liquidity backdrop, they said.
AAA scales
MMD's scale was unchanged: 2.46% in 2026 and 2.41% in 2027. The five-year was 2.43%, the 10-year was 2.76% and the 30-year was 4.24% at 3 p.m.
The ICE AAA yield curve was little changed: 2.46% (unch) in 2026 and 2.43% (unch) in 2027. The five-year was at 2.39% (unch), the 10-year was at 2.77% (+1) and the 30-year was at 4.20% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.45% (-1) in 2025 and 2.42% (unch) in 2026. The five-year was at 2.43% (unch), the 10-year was at 2.76% (unch) and the 30-year yield was at 4.22% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.48% in 2025 and 2.43% in 2026. The five-year at 2.37%, the 10-year at 2.71% and the 30-year at 4.13% at 4 p.m.
Treasuries were slightly weaker.
The two-year UST was yielding 3.504% (+2), the three-year was at 3.551% (+3), the five-year at 3.712% (+2), the 10-year at 4.166% (+2), the 20-year at 4.795% (+1) and the 30-year at 4.84% (+2) near the close.
