Municipals were steady to slightly weaker in spots Friday as U.S. Treasury yields rose out long and equities ended down.
The two-year muni-UST ratio Friday was at 69%, the five-year at 65%, the 10-year at 66% and the 30-year at 87%, 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 88% at a 4 p.m. read.
The UST curve saw a "good bull steepening" on Wednesday and Thursday, while muni yields were little changed, said BofA strategists.
"But because of the Treasury rally, muni relative values versus Treasuries cheapened some from recent levels," they said.
Short-maturity muni ratios currently look "particularly cheap" given the limited rate cut(s) indicated by the Federal Reserve's dots plot, BofA strategists said, noting short-duration muni investors should "step in" here.
"Long-maturity muni yields should soon move down as well, as this Treasury market rally is on better ground and looks like the resumption of [the] May-October trend," they said.
In November, long-maturity munis did not move in "any meaningful way," whereas long-maturity USTs were volatile, BofA strategists said.
Prior to the Fed meeting, the 10-year UST yield "was sold to 4.20%, a line many investors — especially bond bears — were watching," they said. "The Fed's actions on Wednesday thwarted bond bear's efforts and hopes."
Two instances of 20-plus basis point UST selloffs since mid-October didn't "stir any anxiety in munis," they said, noting "large issuance volumes were priced and cleared the market at yearly low yields."
With the Fed action, the market may be on "better footing," BofA strategists said.
For the final two weeks of the year, large calendars should be bought, with BofA's 2025 issuance forecast of $580 billion remaining on track.
Following sizable outperformance last week, tax-exempts largely "held serve this week, despite elevated secondary offerings, higher tax-exempt issuance month-to-date, evidence of increased tax-trading, uncompelling relative value across most of the curve (save the 2-year spot), and Wednesday's [Federal Open Market Committee] release," said J.P. Morgan strategists led by Peter DeGroot.
"We still believe the market has room to outperform slightly for the rest of the year," said Barclays strategists led by Mikhail Foux.
Over the past five years, relative performance of tax-exempts versus USTs has been relatively strong, with five-year ratios falling two percentage points and 10-year ratios falling three percentage points, they said.
For the remainder of the month, supply dips, and "we might see some marginal grind lower for high grade," Barclays strategists said.
Next week's lighter calendar will be met with "$9 billion of reinvestment capital as the primary market fades into the holiday season," J.P. Morgan strategists said.
"Given continued range-bound UST rates, municipals could tick tighter into January," they said. "We do not think that investors should chase the market at current fully valued levels. We believe that there will be better opportunity to invest at cheaper levels in 1Q26."
In the primary market Friday, Goldman Sachs priced for the Black Belt Energy Gas District (A2//) $847.81 million of gas project revenue bonds, 2025 Series G, with 5s of 10/2035 at 4.34%, callable 7/1/2035.
New-issue calendar
The new-issue calendar falls to an estimated $5.91 billion, with $5.629 billion of negotiated deals on tap and $280 million of competitives.
The New York City Transitional Finance Authority leads the negotiated calendar with $2 billion of future tax-secured subordinate refunding bonds.
The competitive calendar is led by Melrose, Massachusetts, with $31.95 million of municipal purpose loan GOs.
AAA scales
MMD's scale was cut two basis points 20 years and out: 2.48% (unch) in 2026 and 2.43% (unch) in 2027. The five-year was 2.43% (unch), the 10-year was 2.76% (unch) and the 30-year was 4.24% (+2) at 3 p.m.
The ICE AAA yield curve was cut up to two basis points: 2.46% (unch) in 2026 and 2.44% (+1) in 2027. The five-year was at 2.40% (+1), the 10-year was at 2.79% (+1) and the 30-year was at 4.20% (+2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut two basis points out long: The one-year was at 2.48% (unch) in 2025 and 2.43% (unch) in 2026. The five-year was at 2.43% (unch), the 10-year was at 2.77% (unch) and the 30-year yield was at 4.22% (+2) at 4 p.m.
Bloomberg BVAL was cut up to two basis points: 2.50% (unch) in 2025 and 2.45% (unch) in 2026. The five-year at 2.38% (unch), the 10-year at 2.73% (unch) and the 30-year at 4.13% (+2) at 4 p.m.
Treasuries were weaker out long.
The two-year UST was yielding 3.529% (-1), the three-year was at 3.584% (flat), the five-year at 3.748% (+1), the 10-year at 4.193% (+4), the 20-year at 4.82% (+5) and the 30-year at 4.857% (+6) near the close.
Primary to come
The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price Wednesday $2 billion of future tax-secured subordinate refunding bonds, consisting of $500 million of tax-exempt Fiscal 2026 Series C bonds, $1.312 billion of tax-exempt Fiscal 2026 Series D-1 bonds, $167.42 million of taxable Fiscal 2026 Series D-2 bonds, and $20.67 million of tax-exempt Fiscal 2026 Series E bonds. Jefferies.
The Ohio State University (Aa1/AA+/AA+/) is set to price Tuesday $562 million of general receipts refunding bonds (Multiyear Debt Issuance Program III), Series 2026A. Jefferies.
The North Carolina Medical Care Commission (//BBB+/) is set to price Wednesday $313.5 million of retirement facilities first mortgage revenue bonds (Deerfield Episcopal Retirement Community Project), Series 2026, consisting of $153.435 million of Series 2026A, $16.85 million of Series 2026B-1, $25.3 million of Series 2026B-2, $33.7 million of Series 2026B-3 and $84.25 million of Series 2026B-4. Ziegler.
The Prosper Independent School District, Texas, (Aaa//AAA/) is set to price Tuesday $279.895 million of PSF-insured unlimited tax school building and refunding bonds, Series 2026. Piper Sandler.
The Cypress-Fairbanks Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $236.34 million of PSF-insured unlimited tax refunding bonds, Series 2026. Jefferies.
The New York City Housing Development Corp. (Aa2///) is set to price Tuesday $218.28 million of sustainable development housing impact bonds, consisting of $37.11 million of non-AMT 2025 Series F bonds and $181.17 million of taxable 2025 Series G bonds. BofA Securities.
The Glendale Community College District, California, (Aa2/AA-//) is set to price Wednesday $200 million of GO bonds, 2024 Election, 2025 Series A. RBC Capital Markets.
The Georgia Higher Education Facilities Authority (/AA-//) is set to price Tuesday $190.5 million of taxable revenue bonds (USG Real Estate Foundation XIV, LLC Project), Series 2026A. RBC Capital Markets.
The Metropolitan Water District of Southern California (/AAA/AA+/) is set to price Wednesday $184.225 million of special variable rate water revenue refunding bonds, 2025 Series B. PNC Capital Markets.
The Build NYC Resource Corp. is set to price Tuesday $183.53 million of tax-exempt revenue bonds (Teachers Village Social Impact Mott Haven, LLC Project), consisting of $170.595 million of Series 2025 Class I and $12.935 million of Series 2025 Class II. Jefferies LLC.
The EHOVE Joint Vocational School District, Ohio, (/AA//) is set to price Wednesday $150 million of GO School Improvement bonds, Series 2026. Piper Sandler.
The Tulsa County Industrial Authority (/A+//) is set to price Monday $115.4 million of educational facilities lease revenue bonds (Owasso Public Schools Project), Series 2025. D.A. Davidson.
Competitive
Melrose, Massachusetts, (/AA+//) is seto sell $31.95 million of municipal purpose loan GOs, Series 2025, at noon Eastern Monday.
