Munis were a touch cheaper Wednesday as muni yields inched higher in sympathy with US Treasury yields and equities ended down.
Wednesday saw the release of the anticipated May consumer price index report, which came in as expected, a "major relief" for financial markets and the Federal Reserve ahead of its meeting next week, the first with Kevin Warsh as the new chair, said Jay Woods, chief market strategist at Freedom Capital Markets.
The initial reaction following the CPI report didn't "move the needle" in the bond market, as the 10-year UST yield was just over 4.5%, he said, noting traders are watching that "4.6 level."
"We do not want to see new highs in the yield, as that could accelerate a further downward move in equities," Woods said.
Elsewhere, there is robust demand for munis, and "you cannot ignore the fact that we are close to record inflows into the asset class," said Ann Ferentino, co-head of the municipal bond group at Federated Hermes.
The Investment Company Institute Wednesday reported inflows of $1.037 billion for the week ending June 3, following $2.125 billion of inflows the previous week. Inflows have topped $1 billion each of the past seven weeks.
Exchange-traded funds saw inflows of $1.872 billion after $2.543 billion of inflows the week prior, per ICI data.
Part of the reason for the demand is that munis are a great complement and diversifier to a portfolio, Ferentino said.
"They have a low correlation to equities, and that demand [for the asset class] is going to continue," she said.
New-issue market
In the primary market Wednesday, Jefferies priced for Massachusetts (Aa1/AA+/AA+/) $883.73 million of GOs. The first tranche, $750 million of consolidated loan of 2026 bonds, Series 2026D, saw 5s of 12/2029 at 2.45%, 5s of 6/2039 at 3.41%, 5s of 6/2041 at 3.54%, 5s of 6/2046 at 4.04%, 5s of 6/2051 at 4.39%, 5s of 6/2056 at 4.55% and 5.25s of 6/2056 at 4.50%, callable 6/2036.
The second tranche, $133.73 million of refunding bonds, Series 2026B, saw 5s of 7/2030 at 2.56%, 5s of 2036 at 3.11% and 5s of 2038 at 3.31%, callable 7/2036.
Ramirez priced for the Los Angeles Community College District (Aaa/AA+//) $568.515 million of 2026 GO refunding bonds, with 5s of 8/2026 at 2.37%, 5s of 2031 at 2.38%, 5s of 2036 at 2.85%, 5s of 2041 at 3.39% and 5s of 2042 at 3.46%, callable 8/2036.
Ramirez priced for the Pennsylvania Turnpike Commission $288.835 million of turnpike subordinate revenue refunding bonds. The first tranche, $174.385 million of Second Series of 2026 bonds (A2/A+/A/A+/), saw 5s of 12/2030 at 2.79%, 5s of 2031 at 2.89%, 5s of 2036 at 3.38%, 5s of 2041 at 3.72% and 5s of 2043 at 3.88%, callable 12/2036.
The second tranche, $114.45 million of First Series of 2026 motor license fund-enhanced special bonds (Aa3//AA-/AA-/) saw 5s of 12/2028 at 2.52%, 5s of 2032 at 2.93%, 5s of 2036 at 3.28% and 5s of 2039 at 3.55%, callable 12/2036.
In the competitive market, Horseheads Central School District, New York, sold $109.145 million of general obligation bond anticipation notes to BofA Securities, with 3.75s of 6/2027 at 2.74%, noncall.
