Municipals improved Friday after a volatile week for the asset class, ignoring losses in U.S. Treasuries, while equities closed the week mixed.
Investors will see higher yields and ratios together with an almost $11 billion new-issue slate for the ultimate week of the month and the last ahead of the election.
Triple-A yields fell three to seven basis points with the most important gains out long while govies saw losses of 4 basis points across the curve.
Muni-UST ratios fell barely on the day’s moves. The 2-year ratio Friday was at 65%, the three-year at 64%, the five-year at 65%, the 10-year at 70% and the 30-year at 85%, in keeping with Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 66%, the three-year at 65%, the five-year at 66%, the 10-year at 71% and the 30-year at 84% at 4 p.m.
After pulling the deal earlier this week, Morgan Stanley on Friday brought the California Community Alternative Financing Authority’s (A1///) $1.243 billion of green Clean Energy Project revenue bonds, Series 2024E, pricing the take care of 5s of 9/2027 at 3.34%, 5s of three/2029 at 3.50%, 5s of 9/2029 at 3.50%, 5s of three/2032 at 3.86%, 5s of 9/2032 at 3.87% and 5s of two/2055 with a compulsory put date of 9/1/2032 at 3.92%, callable 6/1/2032.
While Wednesday’s session swiftly pushed yields higher by as much as 18 basis points, the moves pushed investors to leap into the market, with the demand pushing yields down again and new-issues that priced earlier within the week traded up within the secondary.
“We imagine investors will likely be very comfortable with purchases made within the context of current market levels as we move through 2025, given our view that the Fed is within the early stages of an easing cycle and that the final direction of UST rates is lower next yr,” said Peter DeGroot, managing director and head of the investment bank’s municipal research and strategy team at J.P. Morgan.
The market couldn’t hold any longer “and at last cracked,” said Barclays strategist Mikhail Foux.
“It began regularly, but midweek it felt like a capitulation trade to us — ratios have moved up … and bid-wanted volume has spiked, although there was little or no trading activity as investors have grow to be quite cautious, which is hardly surprising,” he said.
Meanwhile, he noted “dealer balance sheets have continued to swell, leaving them less respiration room to support the market.”
Issuance for next week is at an estimated $10.8 billion led by Wisconsin with $1.55 billion of GOs, followed by the Pennsylvania Higher Education Facilities Authority with $1.1 billion of Thomas Jefferson University revenue bonds and $860 million of University of Miami issue revenue and refunding bonds from the Miami-Dade Education Facilities Authority.
California leads the competitive calendar with $852.405 million of tax-exempt and taxable various purpose GOs.
The present sell-off “presents a possibility, and we’d be comfortable so as to add at cheaper levels” going into the November elections, Foux said.
Munis have began pricing within the possible effect of a red wave, he said, “and if one indeed involves pass, the market response could be less pronounced.
“Though it doesn’t feel to us that the correction is over — we would want to see rate stabilization first, we’re inclined to begin dipping in our toes, as we imagine that the muni market should still perform relatively well at the top of 2024, whatever the presidential consequence — to us it’s only a matter of locating a greater entry point,” Foux said.
DeGroot said J.P. Morgan expects the top of next week “will mark the top of the difficult technical period in 2024 and imagine that net supply in November (negative $8 billion including calls) will lead to raised valuations broadly within the municipal market.”
Bond Buyer 30-day visible supply sits at $14.52 billion.
AAA scales
Refinitiv MMD’s scale was bumped three to seven basis points: The one-year was at 2.83% (-3) and a pair of.65% (-3) in two years. The five-year was at 2.64% (-3), the 10-year at 2.97% (-6) and the 30-year at 3.82% (-7) at 3 p.m.
The ICE AAA yield curve was bumped two to seven basis points: 2.94% (-2) in 2025 and a pair of.70% (-3) in 2026. The five-year was at 2.65% (-3), the 10-year was at 3.97% (-5) and the 30-year was at 3.76% (-2) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was bumped: The one-year was at 2.87% (-3) in 2025 and a pair of.68% (-3) in 2026. The five-year was at 2.67% (-3), the 10-year was at 2.95% (-4) and the 30-year yield was at 3.76% (-6) at 4 p.m.
Bloomberg BVAL was unchanged: 2.83% in 2025 and a pair of.64% in 2026. The five-year at 2.67%, the 10-year at 2.99% and the 30-year at 3.79% at 4 p.m.
Treasuries were weaker.
The 2-year UST was yielding 4.105% (+4), the three-year was at 4.048% (+4), the five-year at 4.063% (+4), the 10-year at 4.244% (+4), the 20-year at 4.587% (+4) and the 30-year at 4.50% (+3) on the close.
Primary to come back
Wisconsin (Aaa/AA+/AA+/) is ready to cost Wednesday $1.55 billion of general obligation bonds consisting of $886.245 million of assorted purpose GO refunding bonds, serials 2025-2039, and $664.155 million of motorcar fuel tax and vehicle related fees GO refunding bonds, serials 2025-2039, 2042. BofA Securities.
The Pennsylvania Higher Educational Facilities Authority (A3/A/A/) is ready to cost Wednesday $1.107 billion of Thomas Jefferson University revenue bonds, consisting of $655 million of Series 2024B-1 fixed rate revenue bonds, $285 million of Series 2024B-2 and $168 million of taxable revenue refunding bonds. J.P. Morgan Securities LLC.
The Miami-Dade County Educational Facilities Authority (A2/A-//) is ready to cost Tuesday $860 million of university revenue and refunding bonds, consisting of $552 million of Series A, serials 2025-2048, $308 million of Series B, 2030-2045. Barclays Capital Inc.
The Recent Orleans Aviation Board (A2//A/) is ready to cost Wednesday $597.4 million of general airport revenue refunding bonds, AMT, non-AMT and taxable. BofA Securities
The Virginia Housing Development Authority (Aaa/AAA//) is ready to cost Tuesday $455.48 million of commonwealth mortgage bonds, non-AMT and taxables. Wells Fargo Bank, N.A. Municipal Finance Group.
Atlanta (Aa3/A+//) is ready to cost Tuesday $383.51 million of water and wastewater subordinate lien sustainability revenue bonds. J.P. Morgan Securities LLC.
The Harris County Houston Sports Authority (A2/AA//) is ready to cost Tuesday $329.68 million of senior lien and second lien refunding bonds, insured by Assured Guaranty. Wells Fargo Bank, N.A. Municipal Finance Group.
The Katy Independent School District, Texas, (Aaa/AAA//) is on the day-to-day calendar with $220.28 million of unlimited tax refunding bonds, PSF. BOK Financial Securities, Inc.
The Indiana Housing and Community Development Authority (Aaa//AA+/) is ready to cost Tuesday $198.62 million of single family non-AMT, AMT and taxable social revenue bonds. J.P. Morgan Securities LLC
The School District of Pasco County, Florida, (Aa3//AA/) is ready to cost Tuesday $197.195 million of sales tax revenue bonds. BofA Securities.
The Construct NYC Resource Corp. is ready to cost Tuesday $150 million of Success Academy Charter Schools Project revenue bonds. PNC Capital Markets LLC.
The Nebraska Investment Finance Authority (/AAA//) is ready to cost Wednesday $130.51 million of non-AMT and taxable single-family housing revenue bonds. J.P. Morgan Securities LLC.
The Brownsburg 1999 School Constructing Corp., Indiana, (/AA+//) is ready to cost Tuesday $120.36 million of ad valorem property tax first mortgage bonds, insured by Indiana State Aid Intercept Program. Stifel, Nicolaus & Company, Inc.
The Maine State Housing Authority (Aa1/AA+//) is ready to cost Tuesday (retail Monday) $110 million of mortgage purchase social bonds. Barclays Capital Inc.
The Atlanta Urban Redevelopment Agency (Aa1//AAA/) is ready to cost Wednesday $103.735 million of surface transportation and infrastructure projects revenue bonds. Ramirez & Co., Inc.