Municipals were little changed Tuesday as U.S. Treasuries richened slightly and equities ended down.
The two-year muni-UST ratio Tuesday was at 69%, the five-year at 64%, the 10-year at 67% and the 30-year at 89%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 68%, the five-year at 65%, the 10-year at 67% and the 30-year at 88% at a 4 p.m. read.
While muni performance was slightly negative the last week of October, Daryl Clements, a portfolio manager at AllianceBernstein, noted the month saw a 1.24% positive return for investment-grade munis.
Long-maturity bonds have outperformed short-maturity bonds, with the "Bloomberg 20-year index posted a return of positive 2.18%, while the Bloomberg three-year index posted a return of negative 0.14%," he said.
Since Aug. 29, the 20-year index is up 6.15%, while the three-year index is flat, according to Clements.
Long-maturity munis continue to look "compelling," even after the rally that began at the end of August, he said.
"Given the steepness of the muni yield curve, we anticipate that the yield curve will continue to flatten and long-maturity bonds will outperform short-maturity bonds," Clements said.
Muni valuations at intermediate and long maturities are "still very rich/overbought" and encourage buyers to "be careful, seek more spread, trade up in credit and structure where spreads are unyielding, and wait for opportunities," said Matt Fabian, president of Municipal Market Analytics.
Meanwhile, "the front end has been better priced, with an oversold/very-oversold valuation through the nine-year," he said.
Issuers, Fabian noted, should "sell more long bonds, especially ahead of the next headline development."
"There may still be more upward than downward bias at longer yield spots and all issuers face a rising cost curve via climate change, federal retrenchment, etc.," he said.
Issuance this week is $13.118 billion, with one-fifth coming from the largest prepaid gas deal on record — $2.699 billion of energy supply revenue bonds from the Southeast Energy Authority — that priced Monday.
Tuesday saw a good slate of deals, including the acceleration of Ohio's $508.865 million of GOs and Austin's $419.035 million of electric utility system revenue refunding bonds.
While issuance is expected to slow the rest of the year, market participants are already releasing 2026 projections.
MMA, for instance, projects at least $600 billion of issuance in 2026, up from its estimate that 2025 will end with $560 billion to $575 billion, Fabian said.
Next year will see a slower rate of growth than in 2025 because issuers will want to be careful in the face of headline risks, Fabian predicted. But dovish monetary policy should provide more opportunity for call activity.
State and local governments have a significant need for capital projects and, assuming inflation remains elevated, their project costs will likely encourage more borrowing. Fabian also expects infrastructure needs and climate change to spur public-private partnerships; those P3s will complement, not replace, bonds.
In the primary market Tuesday, Morgan Stanley priced for Ohio (Aaa/AAA/AAA/) $508.865 million of GOs. The first tranche, $292.545 million of higher education GOs, Series 2025C, saw 5s of 2026 at 2.59%, 5s of 2030 at 2.48%, 5s of 2035 at 2.84%, 5s of 2040 at 3.38%, and 5s of 2045 at 3.91%, callable 11/1/2034.
The second tranche, $171.455 million of higher education GO refunding bonds, Series 2025D, saw 5s of 2026 at 2.59%, 5s of 2030 at 2.48%, 5s of 2035 at 2.84%, and 5s of 2036 at 2.92%, callable 11/1/2034.
The third tranche, $44.865 million of conservation projects GOs, Series 2025A, saw 5s of 2026 at 2.61%, 5s of 2030 at 2.48%, and 5s of 2035 at 2.82%, noncall.
Morgan Stanley priced for Austin, Texas, (Aa3/AA-/AA-/) $419.035 million of electric utility system revenue refunding bonds, with 5s of 2026 at 2.66%, 5s of 2030 at 2.65%, 5s of 2035 at 2.98%, 5s of 2040 at 3.56%, 5s of 2045 at 4.06%, 5s of 2050 at 4.36%, and 5s of 2055 at 4.45%, callable 11/15/1035.
BofA Securities priced for the Lee County School Board (Aa3//AA-/) $392.715 million of certificates of participation. The first tranche, $335.845 million of Series 2025A, saw 5s of 2029 at 2.68%, 5s of 2030 at 2.64%, 5s of 2035 at 3.03%, 5s of 2040 at 3.63%, 5s of 2045 at 4.21%, and 5.25s of 2050 at 4.44%, callable 8/1/2035.
The second tranche, $56.87 million of Series 2025B, saw 5s of 2026 at 2.74% and 5s of 2028 at 2.66%, noncall.
BofA Securities priced for the Illinois Finance Authority (A1/A+/AA-/) $387.89 million of Rush University System for Health revenue bonds, with 5s of 2030 at 3.03% and 5s of 2035 at 3.35%. The 2030 maturity is callable 11/15/2029, the rest of the bonds are noncall.
J.P. Morgan Securities priced for the Greater Orlando Aviation Authority (/BB+//) $258.34 million of special purpose airport facilities revenue bonds (United Airlines, Inc. project), with 5.25s of 2034 at 4.08%, 5.25s of 2035 at 4.18%, and 5.5s of 2037 at 4.28%, callable 11/1/2033.
BofA Securities priced for the Huntsville Health Care Authority (A1///) $160 million of Series 2025B bonds, with 5s of 2035 at 3.37%, noncall.
In the competitive market, the Illinois State Toll Highway Authority (Aa3/AA-/AA-/) sold $500 million of toll highway senior revenue bonds, Series 2025A, to Morgan Stanley, with 5s of 2041 at 3.70%, 5s of 2045 at 4.14% and 5s of 2047 at 4.24%, callable 7/1/2035.
The Charleston County School District (/AA+//) sold $134.525 million of South Carolina school district credit enhancement-insured GOs to Wells Fargo, with 3.75s of 2026 at 2.63% and 5s of 2028 at 2.47%, noncall.
Hennepin County, Minnesota, (/AAA/AAA/) sold $100 million of GOs to BofA Securities, with 5s of 2027 at 2.51%, 5s of 2030 at 2.43%, 5s of 2035 at 2.79%, 5s of 2040 at 3.33%, and 5s of 2045 at 3.90%, callable 12/1/2035.
AAA scales
MMD's scale was little changed: 2.56% (unch, no Nov. roll) in 2026 and 2.46% (unch, no Nov. roll) in 2027. The five-year was 2.38% (unch, no Nov. roll), the 10-year was 2.74% (unch, +1bp Nov. roll) and the 30-year was 4.15% (unch, no Nov. roll) at 3 p.m.
The ICE AAA yield curve was bumped one to two basis points: 2.55% (-1) in 2026 and 2.46% (-1) in 2027. The five-year was at 2.41% (-2), the 10-year was at 2.75% (-2) and the 30-year was at 4.10% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.55% in 2025 and 2.46% in 2026. The five-year was at 2.38%, the 10-year was at 2.73% and the 30-year yield was at 4.12% at 3 p.m.
Bloomberg BVAL was unchanged: 2.52% in 2025 and 2.47% in 2026. The five-year at 2.37%, the 10-year at 2.71% and the 30-year at 4.07% at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 3.578% (-3), the three-year was at 3.588% (-3), the five-year at 3.695% (-3), the 10-year at 4.084% (-3), the 20-year at 4.643% (-2) and the 30-year at 4.668% (-2) near the close.
Primary to come
The Los Angeles Department of Water and Power (Aa2//AA-/AA/) is set to price Thursday $977.65 million of water system revenue refunding bonds, Series 2025C. RBC Capital Markets.
North Carolina (Aaa/AAA/AAA/) is set to price Wednesday $327.95 million of GO refunding bonds, consisting of $147.885 million of Series 2025C bonds and $180.065 million of Series 2026A forward delivery bonds. BofA Securities.
Austin (A1/A+//AA-/) is also set to price Thursday $224.115 million of AMT airport system revenue refunding bonds, Siebert Williams Shank.
The Waste Pro USA Project is set to price $200 million of nonrated solid waste disposal revenue bonds through the Florida Development Finance Corp., the Mississippi Business Finance Corp. and the Louisiana Public Facilities Authority. Barclays.
Irvine, California, (/AA//) is set to price Wednesday $131.37 million of Community Facilities District No. 2013-3 (Great Park) Improvement Area No. 11 special tax bonds, 2025, insured by Assured Guaranty, consisting of $127.825 million of capital indexed bonds and $3.55 million of capital appreciation bonds. Stifel Nicolaus.
The New York State Housing Finance Agency (Aa2///) is set to price Thursday $115.51 million of sustainability affordable housing revenue bonds, 2025 Series E. J.P. Morgan.
The Missouri Development Finance Board is set to price Wednesday $100.315 million of nonrated tax-exempt tax increment and special district revenue bonds (Lakeport Village Project), Series 2025A. Stifel Nicolaus.
Competitive
Washington (Aaa/AA+/AA+/) is set to sell $540.065 million of various purpose GO refunding bonds, Series R-2026A, at 10:15 a.m. Eastern on Wednesday; and $226.815 million of motor vehicle fuel tax and vehicle-related fees GO refunding bonds, Series R-2026B, at 10:45 a.m. Wednesday.
King County, Washington, (Aa1/AA+//) is set to sell $267.52 million of sewer revenue and refunding bonds, Series 2025A, at 10:45 a.m. Thursday.
Jessica Lerner contributed to this story.
