Municipal bonds were little modified to a touch weaker in spots as investors shifted their focus to the larger new-issue slate ahead while U.S. Treasuries saw losses along the curve and equities closed the session within the red.

Municipal yield curves were mostly little modified to weaker by a basis point, depending on the dimensions, while USTs saw losses of three to 6 with the most important losses out long.

Ratios fell barely in consequence. The 2-year municipal to UST ratio Monday was at 61%, the five-year at 62%, the 10-year at 65% and the 30-year at 81%, in line with Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 62%, the five-year at 63%, the 10-year at 66% and the 30-year at 81% at 3:30 p.m.

The biggest deal of the week priced for retail investors. Morgan Stanley & Co. LLC priced for retail investors $2.158 billion of state sales tax revenue refunding bonds for the Dormitory Authority of the State of Recent York (Aa1//AAA).

The primary series, $2.054 billion of Series B-1, saw 5s of three/2026 at 2.69%, 5s of 2029 at 2.67%, 5s of 2034 at 2.94%, 5s of 2039 at 3.21%, 5s of 2044 at 3.59%, 5s of 2049 at 3.82%, and 4s of 2054 at 4.12%, callable 3/15/2035. The second, $100 million of Series B-2, saw 5s of 9/2028 at 2.65%, callable 3/15/2028, and 5s of 2029 at 2.68%, callable 3/15/2029. The last series, $3.89 million of taxables, mature in 3/2026 at 4.25% par.

CreditSights’ Head of Municipal Strategy Pat Luby said demand will likely be bolstered by November’s minimal supply of Recent York paper, which totaled $266 million, the bottom monthly total since 2010.

Other deals to observe this week include high-grade Massachusetts’ three competitive loans totaling $800 million, set to sell Thursday, Luby said. “As a big state with a diversified economy, Mass GOs are a core holding of many municipal bond portfolios, but with the 10-year benchmark yield now at +3, we don’t anticipate any room for outperformance of the bonds.”

Net supply for Massachusetts was negative $852 million in November, but year-to-date supply has exceeded redemptions by $2.8 billion, Luby noted.

Munis overall are within the black to date this month, with the Bloomberg Municipal Index at +0.33% in December and a couple of.88% year-to-date, the high-yield index is at +0.27% in December and returning 8.41% in 2024 while taxable munis are returning 0.43% to date this month and 4.58% in 2024.

USTs are returning 0.38% this month and a couple of.54% year-to-date and corporates are within the black at 0.50% and 4.66% in 2024.

December and January have historically been strong months for municipal performance, accounting for 30% and 27% of full-year total returns over the past five years, respectively, noted Patrick Haskell, head of the municipal bonds group, James Schwartz, head of municipal credit research, and Sean Carney, CIO of municipal bond funds at BlackRock.

That said, “given the magnitude of the recent rally and current wealthy relative valuations, we maintain some near-term patience. Our focus stays on increasing income in portfolios as opportunities present,” they wrote in BlackRock’s Municipal Market Monthly.

They’ve shifted back to a neutral duration posture overall.

“We advocate a barbell yield curve strategy, pairing front-end exposure with the 15-20-year a part of the curve,” they said. “We maintain an up-in-quality bias overall, but think high yield offers risk-reward opportunity, given attractive carry, favorable structures, and the flexibility to generate alpha through security selection.”

Primary to come back:
The California Community Alternative Financing Authority is about to cost Tuesday $1.25 billion of unpolluted energy project revenue green bonds (Recent York Life Insurance Co.) (Aaa///), serial 2056. Goldman Sachs & Co. LLC.

The Chicago Transit Authority (/AA//AA) is about to cost Tuesday $570.865 million of sales tax receipts revenue refunding bonds, Series 2024A, serials 2025-2049. Jefferies LLC.

The National Finance Authority is about to cost Wednesday $435.357 million of municipal certificates, consisting of $153.611 million of Series 2024-4 Class A-US (/AA-//), $32.584 million of Series 2024-4 Class BUS Subordinate (/BBB//), serials 2042, $205.558 million of Series 2024ACA (/AA-//), serials 2039, and $43.603 million of Series 2024BCA subordinate social certificates (/BBB//), serials 2040. Jefferies LLC.

The Metropolitan Water Reclamation District of Greater Chicago (/AA+/AAA/) is about to cost Tuesday $317.745 million of general obligation limited tax capital improvement bonds, consisting of $253.815 million of 2024 Series A green bonds, $18.14 million of Series B green refunding bonds, $45.79 million of Series C refunding bonds, in addition to Series D and E bonds, the whole of which will likely be subject to tender offer results. Barclays Capital Inc.

The MIDA Mountain Village Public Infrastructure District, Utah, (////) is about to cost Wednesday $300 million of subordinate tax allocation revenue bonds. Piper Sandler & Co.

Douglas County School District RE-1, Colorado, (Aa1//AA+/) is about to cost Wednesday $270 million of general obligation bonds, insured by Colorado State Intercept Program, serials 2029-2044. RBC Capital Markets.

The Michigan Finance Authority (Aaa//AAA/) is about to cost Wednesday $249.805 million of state revolving fund programs revenue bonds, serials 2025-2048. BofA Securities.

The Capital Trust Authority, Florida, is about to cost $200.245 million of nonrated Alpha Lifestyle Partners, Inc. Project senior living facilities bonds. Stifel, Nicolaus & Company, Inc.

The Public Finance Authority is about to cost $172.595 million of nonrated Inperium Project revenue refunding bonds, terms 2034, 2044, 2049. KeyBanc Capital Markets.

Mansfield, Texas, (Aa1/AAA/AA+/) is about to cost $158.035 million of combination tax and revenue certificates of obligation, Series 2025, and general obligation refunding and improvement bonds, Series 2025. Raymond James & Associates, Inc.

The Iowa Finance Authority is about to cost Thursday $148.56 million of Lifespace Communities, Inc. revenue bonds (//BBB/). HJ Sims & Co.

Aurora, Colorado, (/AA+/AA+/) is about to cost Tuesday $137.44 million of first-lien water revenue bonds, serial 2025-2044, terms 2049, 2054. RBC Capital Markets.

The Philadelphia Redevelopment Authority (A1/A+/A+/) is about to cost Tuesday $127.84 million of City Service Agreement taxable revenue bonds, City of Philadelphia Neighborhood Preservation Initiative. Morgan Stanley & Co. LLC.

The Recent York State Housing Finance Agency (Aa1///) is about to cost Thursday $124.275 million of state personal income tax revenue bonds, economic development and housing sustainability bonds, Siebert Williams Shank & Co., LLC.

The San Luis Coastal Unified School District, California, (Aa1///) is about to cost Wednesday $115 million of GO Bonds Election of 2022, Series B refunding. Raymond James & Associates, Inc.

The Westminster Public Schools, Adams County, Colorado, (Aa2///) is about to cost Tuesday $111 million of tax-exempt and taxable general obligation bonds, insured by the Colorado State Intercept Program. RBC Capital Markets.

Adams County, Colorado, (Aa2/AA//) is about to cost Tuesday $103.885 million of certificates of participation, serials 2025-2044, terms 2049, 2054. Stifel, Nicolaus & Company, Inc.

The Illinois Housing Development Authority (Aaa///) is about to cost $101.065 million of tax-exempt non-AMT and taxable multifamily revenue bonds. J.P. Morgan Securities LLC.

The Sheboygan Area School District, Wisconsin, (Aa2///) is about to cost Tuesday $93 million of general obligation promissory notes, serials 2025-2044. Baird.

Competitive:
Massachusetts (Aa1/AA+/AA+/) is about to sell $800 million of general obligation bonds in three sales consisting of $210 million of GOs at 10 a.m., $315 million of GOs at 10:30 a.m. and $275 million of GOs at 11 a.m. eastern Thursday.

Suffolk County, Recent York, is about to sell $350 million of tax anticipation notes at 11 a.m. eastern.