Munis were firmer in the front end and belly of the curve, following U.S. Treasury yields lower after weaker-than-expected retail sales data. Equities ended mixed.
The two-year muni-UST ratio Tuesday was at 60%, the five-year at 58%, the 10-year at 62% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 60%, the five-year at 56%, the 10-year at 61% and the 30-year at 87%, according to ICE Data Services.
"The 2026 story so far appears to follow somewhat lower new issue supply being bid aggressively by a combination of ETF/fund inflows and SMA ladder replenishment (the latter a part of good not great principal reinvestment prospects)," said Matt Fabian, president of Municipal Market Analytics.
"The assumed dedication of SMA accounts to keep replenishing their mostly short maturity ladders implies a more faithful translation of actual demand out of scheduled maturity data," he said.
This is possibly why SMA buying continues despite nominals falling so quickly and so much (MMA's five-year is around 100 basis points below June peaks while the UST five-year is only about 20 basis points), Fabian said.
Supply is starting to "build," he said.
Issuance jumps to $12.6 billion this week, according to LSEG figures.
Tuesday was a particularly heavy day of supply at an estimated $7.5 billion, per J.P. Morgan strategists
The two largest deals were $1.297 billion of general obligation bonds from Washington in four series in the competitive market and $1.252 billion of revenue refunding bonds (Houston Methodist) from the Harris County Cultural Education Facilities Finance Corp. in the negotiated market.
Mutual fund/ETF inflows have been strong too, Fabian said.
Mutual funds have seen more than $9 billion of inflows year-to-date, including last week's $2.4 billion figure, per LSEG Lipper data.
This is more than double the $4 billion of net inflows seen at the point last year, "reinforcing the demand we have expected to build for some time," said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
This weekly momentum, along with creating a "strong backdrop" for issuers planning to come to market in the near term, serves as a reminder to investors "not to wait if they want to capture generationally attractive tax-exempt yields," he said.
The muni yield curve remains steep, said Tim Iltz, fixed-income credit and market analyst at HJ Sims.
Over the past month, muni yields have generally moved lower, resulting in an overall steeper curve and shorter maturities outperforming longer maturities, he said.
Front-end muni yields have fallen more than 30 basis points for tenors shorter than two-years due to strong demand from SMAs and retail investors, Iltz said.
However, USTs for maturities longer than six months have not moved "meaningfully" over the past month, he said.
New-issue market
In the primary market Tuesday, BofA Securities priced for Harris County Cultural Education Facilities Finance Corp.(/AA///) $1.252 billion of revenue refunding bonds (Houston Methodist), Series 2026A, with 5s of 12/2029 at 2.43%, 5s of 2031 at 2.54%, and 5s of 2036 at 3.09%, noncall.
Barclays priced for the
The second tranche, $485.925 million of Series 2026B refunding bonds, saw 5s of 6/2027 at 2.12%, 5s of 2031 at 2.31%, 5s of 2036 at 2.81% and 5s of 2041 at 3.37%, callable 6/1/2036.
Barclays priced for the California Department of Water Resources (Aa1/AA+//) $548.03 million of Central Valley Project Water System revenue bonds, 2026 Series A, with 5s of 12/2027 at 1.71%, 5s of 2031 at 1.79%, 5s of 2036 at 2.31%, 5s of 2041 at 3.02%, 5s of 2046 at 3.82%, 5s of 2051 at 4.17% and 5s of 2056 at 4.27%, callable 12/1/2035.
Wells Fargo priced for Wisconsin (Aa1/AA+//AAA/) $463 million of GO refunding bonds. The first tranche, $334.14 million of Series 2026-1 bonds, saw 5s of 5/2027 at 2.13%, 5s of 2031 at 2.25%, 5s of 2036 at 2.71% and 5s of 2040 at 3.20%, callable 5/1/2036.
The second tranche, $128.77 million of Series 2027-1 forward-delivery bonds, saw 5s of 5/2029 at 2.60%, 5s of 2031 at 2.64% and 5s of 2035 at 3.07%, noncall.
In the competitive market, Washington (Aaa/AA+/AA+/) sold $540.895 million of various purpose GOs, Series 2026C, Bid Group 2, to BofA Securities, with 5s of 2/2042 at 3.44%, 5s of 2046 at 4.07%, and 5s of 2051 at 4.40%, callable 2/1/2036.
The state also sold $235.815 million of various purpose GOs, Series 2026C, Bid Group 1, to BofA Securities, with 5s of 2/2035 at 2.54%, 5s of 2036 at 2.64% and 5s of 2041 at 3.28%, callable 2/1/2036.
Washington sold $221.235 million of taxable GOs, Series 2026T-2, to J.P. Morgan, with all bonds priced at par: 3.5s of 2/2027, 3.81s of 2031 and 4.35s of 2035, noncall.
Additionally, the state sold $299.37 million of motor vehicle fuel tax and vehicle-related fees GOs, Series 2026D, to Wells Fargo, with 5s of 6/2027 at 2.08%, 5s of 2031 at 2.24%, 5s of 2036 at 2.75%, 5s of 2041 at 3.35%, 5s of 2046 at 4.09% and 5s of 2051 at 4.38%, callable 6/1/2036.
Portland Public Schools, Oregon, (Aa1/AA+//) sold $151.27 million of GOs, Bidding Group 1, to BofA Securities, with 5s of 6/2027 at 2.06%, 6s of 2031 at 2.19% and 5s of 2036 at 2.70%, noncall.
The issuer also sold $229.845 million of GOs, Bidding Group 2, to BofA Securities, with 5s of 6/2037 at 2.83%, 4s of 2041 at 3.53%, 5s of 2046 at 4.07% and 5s of 2047 at 4.16%, callable 6/15/2036.
Additionally, Portland Public Schools sold $278.885 million of GOs, Bidding Group 3, to Morgan Stanley, with 5s of 6/2048 at 4.22%, 5s of 2051 at 4.35% and 4.5s of 2055 at par, callable 6/15/2036.
AAA scales
MMD's scale was bumped up to three basis points: 2.08% (-3) in 2027 and 2.08% (-3) in 2028. The five-year was 2.15% (-3), the 10-year was 2.57% (-3) and the 30-year was 4.31% (unch) at 3 p.m.
The ICE AAA yield curve was bumped 20 years and in: 2.12% (-1) in 2027 and 2.10% (-2) in 2028. The five-year was at 2.12% (-2), the 10-year was at 2.57% (-2) and the 30-year was at 4.23% (+1) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped up to two basis points: The one-year was at 2.09% (-2) in 2027 and 2.10% (-2) in 2028. The five-year was at 2.17% (-2), the 10-year was at 2.58% (-2) and the 30-year yield was at 4.24% (unch) at 3 p.m.
Bloomberg BVAL was bumped one to three basis points: 2.10% (-3) in 2027 and 2.08% (-2) in 2028. The five-year at 2.13% (-2), the 10-year at 2.55% (-2) and the 30-year at 4.15% (-1) at 4 p.m.
U.S. Treasuries were firmer.
The two-year UST was yielding 3.453% (-3), the three-year was at 3.515% (-5), the five-year at 3.699% (-5), the 10-year at 4.142% (-6), the 20-year at 4.726% (-7) and the 30-year at 4.783% (-8) near the close.
Primary to come
The California Municipal Finance Authority is set to price $383.576 million of Series 2026-1 municipal certificates, consisting of $327.957 million of Class A-1 bonds, $46.509 million of Class A-2 bonds and $9.11 million of subordinate Class B bonds. J.P. Morgan.
The Massachusetts Development Finance Agency (/BBB-//) is set to price Wednesday $372.74 million of revenue bonds (Middlesex Sustainable Energy, consisting of $165.01 million of tax-exempt Series A bonds and $207.73 million of taxable Series B bonds. BofA Securities.
The University of Oregon (Aa2/AA-//) is set to price Thursday $205.8 million of general revenue and refunding bonds, Series 2026A. BofA Securities.
The Colorado Housing and Finance Authority (Aaa/AAA//) is set to price Wednesday $194.44 million of taxable single-family mortgage bonds, Class I bonds, 2026 Series C-1. RBC Capital Markets.
The Richardson Independent School District, Texas, (Aaa/AAA//) is set to price Thursday $183.105 million of PSF-insured unlimited tax refunding bonds. FHN Financial.
The Round Rock Independent School District, Texas, (Aaa///AAA/) is set to price Wednesday $180.225 million of PSF-insured unlimited tax school building bonds, Series 2026A. J.P. Morgan.
The Public Finance Authority (//A-/) Thursday $132.385 million of tax-exempt revenue bonds (Maniilaq Association Employee Housing Project). Goldman Sachs.
The Unified Government of Wyandotte County/Kansas City, Kansas, is set to price Thursday $119.275 million of sales tax special obligation revenue bonds (Northwest Speedway Star Bond District Project). Piper Sandler.
The Columbus City School District Board of Education (Aa1/AA+//) is set to price Wednesday $100.65 million of various purpose refunding bonds, Series 2026 A. Stifel.
Competitive
The Las Vegas Valley Water District, Nevada, (Aa1/AA+//) is set to sell $343.31 million of GO water refunding bonds, Series 2026A, at 10:45 a.m. Wednesday.
Virginia Beach, Virginia, (Aaa/AAA/AAA/) is set to sell $146.425 million of GO public improvement bonds, Series 2026A, at 10:30 a.m. Thursday.
Memphis, Tennessee, (Aa2/AA//) is set to sell $137.705 million of general improvement bonds at 10:30 a.m. Wednesday.
The University System of Maryland (Aa1/AA+/AA+/) is set to sell $104.125 million of auxiliary facility and tuition revenue bonds, Series 2026A, at 10:45 a.m. Wednesday.
