Municipals were steady to slightly firmer in spots as U.S. Treasury yields rose and equities ended up.
The two-year muni-UST ratio Monday was at 67%, the five-year at 68%, the 10-year at 75% and the 30-year at 92%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 66%, the five-year at 68%, the 10-year at 73% and the 30-year at 92% at 4 p.m.
The market seems to be "set up well" for this week given "manageable, albeit concentrated, tax-exempt supply ($6.4 billion), the arrival of mid-June reinvestment capital (around $16 billion), solid inflows last week, still high absolute yields, and cheaper valuations versus taxable fixed-income," said J.P. Morgan strategists.
After two weeks of a deluge of issuance, supply drops off "given the FOMC meeting and Juneteenth holiday, so we expect investors will refocus on the secondary market and look to scoop up any value left behind in the wake of the issuance onslaught," said Birch Creek strategists.
The market will benefit from another wave of reinvestment cash on June 15, and with only $6 billion of expected issuance this week, technicals should remain strong, said Daryl Clements, a portfolio manager at AllianceBernstein.
Last week, the muni market underperformed for three consecutive days as AAA scales remained little changed with only small bumps on Thursday despite USTs rallying for most of the week, said Birch Creek strategists.
"Dealers reported a stronger tone than the curve implied, with many trades happening 2-4 bps better than prior days," they said. "The positive performance was impressive considering tax-exempt issuance over the past two weeks, each registered in the top four of all-time."
Analysts would ordinarily "expect to see a surge in BWICs to make room for new deals with fresh calls and higher book yields, but J.P. Morgan only reported a 5% increase in customer BWICs," Birch Creek strategists said.
The demand was supported by continued fund inflows and seasonally strong reinvestment cash, they said, noting Lipper reported the seventh straight week of positive figures at $523 million of inflows.
"After many accounts built up cash buffers and sat idly by as volatility surged earlier this year, it seems that investors are fully embracing munis again," said Birch Creek strategists, adding, "investors have been eager to lock in the high absolute yields still on offer," especially after a recent congressional spending bill
"Investors should continue to look further out in the curve as it is still the cheapest part of the curve when compared to Treasuries," said Jason Wong, vice president of municipals at AmeriVet Securities. "Taking into account the five-year average for ratios, the 2–5-year range of muni ratios are cheaper by about 3 percentage points, while the 10–30-year range is cheaper by an average of about 7 percentage points."
This implies that "the long end continues to be the cheapest part of the curve in relative value," he said, warning that "the front end is outperforming the long end in relative value and [the] long end should start to catch up as demand returns," he said.
In the primary market Monday, BofA Securities priced for the Southeast Energy Authority, Alabama, (A1///) $829.795 million of gas supply revenue bonds, Series 2025F, with 5.25s of 11/2026 at 3.41%, 5.25s of 2030 at 3.71%, 5.25s of 2035 at 4.38% and 5.25s of 2055 with a mandatory tender of 11/1/2035 at 4.43%, callable 8/1/2035.
In the competitive market, the Sacramento Metropolitan Fire District, California, (/AA/AAA/) sold $160 million of Election of 2024 GOs, Series A, to BofA Securities, with 5.25s of 8/2026 at 2.45%, 5.25s of 2030 at 2.54%, 5s of 2035 at 3.11%, 5s of 2040 at 3.85%, 5s of 2045 at 4.30%, 4s of 2050 at 4.62% and 4s of 2055 at 4.70%, callable 8/1/2035.
AAA scales
MMD's scale was little changed: The one-year was at 2.64% (-2) and 2.65% (-1) in two years. The five-year was at 2.75% (unch), the 10-year at 3.32% (unch) and the 30-year at 4.54% (unch) at 3 p.m.
The ICE AAA yield curve saw bumps: 2.71% (-2) in 2026 and 2.62% (-3) in 2027. The five-year was at 2.75% (-1), the 10-year was at 3.24% (-1) and the 30-year was at 4.50% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.65% (-2) in 2025 and 2.63% (-2) in 2026. The five-year was at 2.74% (unch), the 10-year was at 3.32% (unch) and the 30-year yield was at 4.53% (unch) at 4 p.m.
Bloomberg BVAL was little changed: 2.66% (-1) in 2025 and 2.68% (-1) in 2026. The five-year at 2.79% (unch), the 10-year at 3.27% (unch) and the 30-year at 4.50% (unch) at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.97% (+2), the three-year was at 3.932% (+3), the five-year at 4.037% (+4), the 10-year at 4.455% (+5), the 20-year at 4.974% (+6) and the 30-year at 4.959% (+6) near the close.
Primary to come
The San Diego County Regional Airport Authority (Aa3/NR/AA-/) is set to price Tuesday $835.495 million of senior airport revenue bonds, consisting of $163.165 million of Series 2025A governmental/non-AMT bonds and $672.33 million of Series 2025B private activity/AMT bonds. BofA Securities.
The Great Lakes Water Authority is set to price Tuesday $492.07 million of water supply system revenue and revenue refunding bonds, consisting of $198.8 million of Series A revenue refunding senior lien bonds (Aa3/AA-/A+/), $71.81 million of Series B revenue refunding second lien bonds (A1/A+/A/), $110.84 million of Series C revenue senior lien bonds (Aa3/AA-/A+/), and $110.62 million of Series D revenue second lien bonds (A1/A+/A/). Siebert Williams Shank.
Riverside County is set to price Tuesday $450 million of non-rated 2025 tax and revenue anticipation notes. J.P. Morgan.
The Great Lakes Water Authority is set to price Tuesday $393.49 million of sewage disposal system revenue and revenue refunding bonds, consisting of $74.795 million of Series A revenue refunding senior lien bonds (Aa3/AA-/AA/), $270.58 million of Series B revenue refunding second lien bonds (A1/A+/AA-/), and $48.115 million of Series C revenue second lien bonds. Siebert Williams Shank.
The Dormitory Authority of the State of New York (Aa3//A+/) is set to price Tuesday $340.755 million of State University of New York dormitory facilities revenue bonds, consisting of $152.665 million of Series A sustainability bonds and $188.09 million of Series B bonds. BofA Securities.
The El Paso County Hospital District, Texas, (///AA+/) is set to price Tuesday $265.455 million of Assured Guaranty-insured GOs. J.P. Morgan.
The New York State Housing Finance Agency (Aa2///) is set to price Tuesday $254.98 million of multi-family affordable housing revenue bonds, consisting of $55.915 million of Series B-1, $56.825 million of Series B-2, $89.52 million of Series B-3 and $52.72 million of Series B-4. Barclays.
The Pennsylvania Economic Development Financing Authority is set to price Tuesday $250 million of Noble Environmental bonds. Fifth Third Securities.
The New York City Housing Development Corp. (Aa2///) is set to price Tuesday $248.43 million of sustainable development housing impact bonds, consisting of $85 million of Series A bonds and $163.43 million of Series B taxable bonds. Wells Fargo.
The Iowa Finance Authority (Aaa//AAA/) is set to price Tuesday $200.42 million of state revolving fund revenue bonds, consisting of $164.935 million of Series C green bonds and $35.485 million of Series D taxable bonds. RBC Capital Markets.
The Douglas County Hospital Authority No. 3, Nebraska, (/A/A+/) is set to price Tuesday $129.205 million of Nebraska Methodist Health System health facilities revenue bonds. RBC Capital Markets.
Tallahassee (Aa3/AA//) is set to price Tuesday $109.045 million of energy system refunding revenue bonds. Goldman Sachs.
Competitive
New Mexico is set to sell $237.82 million of severance tax bonds, Series 2025A, at 10 a.m. Eastern Tuesday.
Olathe, Kansas, is set to sell $155 million of GO temporary notes at 10:30 a.m. Tuesday.
Alex Walters contributed to this story.
