Primary bond market

"The November muni rally continues as month-to-date returns are now at 4.68%, pushing us further into positive territory for the year as year-to-date returns now stand at 2.35%," said Jason Wong, vice president of municipals at AmeriVet Securities.

Proceeds from the social bond issue will go to support high-performing public charter schools across the United States and promote educational equity.

"The market has had a solid tone to it recently even with the strong rally seen this month," Roberto Roffo, managing director and portfolio manager at SWBC Investment Management, said of the Nov. 10 rally where municipal yields in 10 years fell by as much as 40 basis points.

There had been speculation of layoffs in Citi's municipal division as several high-profile employees had been departing the firm over the last year, but sources said they have not heard of any muni layoffs.

The large drop in yields since the end of October can be reflected in sentiment that investors expect a potentially dovish Fed next year, and that a soft landing narrative gives them "permission to finally purchase the bonds they've been admiring," said MMA's Matt Fabian.

The rally in munis over the last three weeks has "pushed ratios to levels that we have not seen since the start of the year," said Jason Wong, vice president of municipals at AmeriVet Securities.

Tradeweb created a model that examines outstanding municipal securities, both tax-exempts and taxables, and it looks for similarities in bond features, such as maturities, call dates, use of proceeds and coupon structures.

BofA Global Research strategists said they believe peak muni yields in this Fed tightening cycle were attained in October 2023 and "the bull market for munis is underway." 

"Demand is firming up. Interest rates have moved off the recent highs. Intermediate muni yields are about 50 basis points off from those highs," said Stephen Shutz, head of tax-exempt fixed income and a portfolio manager at Brown Advisory.

"Everyone is reevaluating and taking a breather after the numbers [on Tuesday]," a New York trader said.

Proceeds from the deal, along with additional monies, were to have been used to fund the costs of the Royal Caribbean Cruises' campus project as well as a debt service reserve fund.

Munis yields fell nine to 12 basis points, depending on the curve, but underperformed larger gains along the UST curve. Large new-issues began pricing.

The deal will finance construction of an 800-room convention headquarters hotel as part of a wider expansion of the facility.

November "continues to be off to a strong start as yields have fallen an average of 34 basis points across the curve since the start of the month," said Jason Wong, vice president of municipals at AmeriVet Securities.

Flush with bond authorization from the Nov. 7 election, officials are formulating issuance plans, while Colorado's governor called lawmakers back to session after a property tax cut measure was defeated by voters.

"As with most fast rallies there are sessions when the market pauses to assess where fair value should play out," said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

Municipal Market Analytics noted the current size of the outstanding TOB market — at about $50 billion from highs of nearly $500 billion before the Financial Crisis — reflects a reduced credit concentration risk and lower overall leverage.

A constructive trading session in the secondary aided a busy primary once again as investors appear to be more engaged in the asset class.

California and Washington sold four large refunding GO deals in the competitive market while several deals of size priced in the negotiated market led by a $650 million for Arizona's Salt River Project. A constructive secondary led yields to fall three to five basis points.

The upgrade brings Illinois up to the A-minus level across the board. The state had three BBB-minus or equivalent ratings as recently as July 2021.