Municipals were firmer Friday ahead of the primary full week of the Recent 12 months and ahead of a $5 billion-plus new-issue calendar while U.S. Treasuries saw modest losses and equities made gains.

Triple-A yields fell as much as seven basis points on the one-year, depending on the size, while UST yields rose two to 4 basis points across the curve.

Investment-grade tax-exempt yields rose greater than 30 basis points last month, and reached attractive enough levels to bring more investors to the muni market, said Mikhail Foux, managing director and head of strategy and research at Barclays.

“While we were somewhat cautious about performance in January 2025, we had expected a year-end rally that didn’t materialize,” Foux said. “Thus, we have gotten a bit more optimistic, as supply might start slower than investors expected: 30-day visible supply continues to be somewhat subdued, and there are plenty of vital economic data releases in the following several weeks, a vacation, and a January [Federal Open Market Committee] meeting, which could keep some issuers on the sidelines.”

Bond Buyer 30-day visible supply sits at $9.95 billion. Investors will probably be greeted with $5.18 billion of supply in the primary full week of 2025.

The negotiated calendar is led by $1 billion of energy supply revenue bonds from the Southeast Energy Authority, followed by $850 million of GOs from the San Diego Community College District.

The Tri-County Regional Vocation Technical School District, Massachusetts, leads the competitive calendar with $144 million of GO school project loan chapter 70B bonds.

As muni yields rose across the curve in December by a mean of 37 basis points, with the most important increases within the 15–20 12 months range, munis are still wealthy to USTs, said Jason Wong, vp of municipals at AmeriVet Securities.

With yields rising overall in 2024, munis cheapened in comparison with USTs within the two–10-year ranges, with the two-year ratio rising by 7.53 percentage points to 65.83%, the five-year ratio by 8.96 percentage points to 66.01% and the 10-year ratio by 10.71 percentage points to 68.93%, Wong noted.

“Munis proceed to stay historically expensive but many are overlooking this as yields proceed to be attractive to investors,” Wong said.

 The 2-year municipal to UST ratio Friday was at 65%, the five-year at 65%, the 10-year at 66% and the 30-year at 81%, in line with Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 65%, the five-year at 64%, the 10-year at 66% and the 30-year at 80% at 4 p.m.

Heavy redemptions and coupon payments this month should help “stabilize” the market, Foux noted.

January’s redemptions will fall 25% from December’s total but will probably be a “modest surge” of redemption demand this week and next as issuers pays out $16.3 billion of $11.8 billion of interest as of Jan. 1, said Pat Luby, head of municipal strategy at CreditSights.

The states with the most important redemptions this month are Illinois at $5.7 billion, Texas at $2.5 billion and Recent Jersey with $2.4 billion, he noted.

Muni mutual funds have seen 4 consecutive weeks of outflows, though Foux noted the yearend negative flows were mostly resulting from tax-loss harvesting and are unlikely to proceed in January.

“January’s performance is often mixed — at times investors could make a number of money (like they did in 2020 or 2023), but could also lose quite a bit (like in 2018 and 2022),” he said.

Nevertheless, in most years, muni returns haven’t been “impressive,” with the asset class seeing gains of only 0.4% on average over the past decade, Foux said.

This 12 months “will probably be an interesting pocket of time for munis as we can have a recent administration which could change tax exemption for municipal bonds which can impact overall supply,” Wong said.

This possibility, together with the Fed’s uncertain monetary policy, will cause some unease and apprehension within the markets, he said.

The Fed may pause Q1 because it continues to attempt to contain inflation and a powerful jobs market, making the Fed much more cautious and data-dependent this 12 months, Wong noted.

AAA scales
MMD’s scale was bumped as much as six basis points: The one-year was at 2.77% (-6) and a pair of.76% (-2) in two years. The five-year was at 2.84% (-2), the 10-year at 3.04% (-2) and the 30-year at 3.89% (unch) at 3 p.m.

The ICE AAA yield curve was bumped as much as seven basis points: 2.82% (-7) in 2026 and a pair of.78% (-3) in 2027. The five-year was at 2.79% (-3), the 10-year was at 3.00% (-3) and the 30-year was at 3.81% (unch) at 4 p.m.

The S&P Global Market Intelligence municipal curve was bumped as much as two basis points: The one-year was at 2.82% (-2) in 2025 and a pair of.77% (unch) in 2026. The five-year was at 2.82% (-1), the 10-year was at 3.02% (-1) and the 30-year yield was at 3.82% (unch) at 4 p.m.

Bloomberg BVAL was bumped one basis point: 2.92% (-1) in 2025 and a pair of.77% (-1) in 2026. The five-year at 2.84% (-1), the 10-year at 3.07% (-1) and the 30-year at 3.79% (-1) at 4 p.m.

Treasuries were weaker.

The 2-year UST was yielding 4.279% (+4), the three-year was at 4.318% (+4), the five-year at 4.411% (+4), the 10-year at 4.599% (+4), the 20-year at 4.887% (+4) and the 30-year at 4.818% (+4) on the close.

Primary to come back
The Southeast Energy Authority (A1///) is about to cost Monday $1 billion of energy supply revenue bonds, Series 2025A, serials 2026-2035, 2056. Goldman Sachs.

The San Diego Community College District (Aa1/AAA//) is about to cost Thursday $850 million of Election of 2024 GO dedicated unlimited ad valorem property tax bonds, consisting of $700 million of Series A-1 and $150 million of Series A-2. RBC Capital Markets.

The Conroe Independent School District (Aaa/AAA//) is about to cost Wednesday $588.815 million of unlimited tax school constructing bonds, Series 2025. Piper Sandler.

The Board of Regents of the University of Texas System is about to cost Wednesday $400 million of revenue financing system bonds, Series 2025A. RBC Capital Markets.

The Utah Housing Corp. (Aa2///) is about to cost Wednesday $225 million of single-family mortgage bonds, consisting of $74 million of Series A non-AMT bonds, serials 2026-2037, terms 2040, 2045, 2050, 2055, 2055, and $151 million of Series B taxable, serials 2026-2036, terms 2040, 2045, 2050, 2055, 2055. BofA Securities.

The Ohio Water Development Authority (Aaa/AAA//) is about to cost Wednesday $200 million of Fresh Water Revolving Fund water development revenue bonds, Series 2025A, serials 2027-2037, term 2044. Huntington Securities.

San Antonio, Texas, (Aa1/AA+/AA/) is about to cost Tuesday $183.045 million of water system junior lien revenue refunding bonds, Series 2025A, serials 2027-2039. Siebert Williams Shank.

The South Carolina State Housing Finance and Development Authority (Aaa///) is about to cost Wednesday $173 million of non-AMT mortgage revenue bonds, Series 2025A, serials 2026-2037, terms 2040, 2045, 2050, 2055, 2055. BofA Securities.

The Pittsburgh Water and Sewer Authority is about to cost $144.25 million of water and sewer system revenue bonds, consisting of $131.405 million of first lien bonds, Series 2025A, and $12.845 million of subordinate bonds, Series 2025B. BofA Securities.,

The Public Finance Authority (//A+/) is about to cost $131.475 million of Kahala Nui Project revenue bonds, Series 2025. HJ Sims.

The Kentucky Housing Corp. (Aaa///) is about to cost Thursday $100 million of single-family mortgage revenue bonds, consisting of $40 million of Series A non-AMT bonds, serials 2026-2037, terms 2040, 2045, 2049, 2055, and $60 million of Series B taxables, serials 2026-2036, terms 2040, 2045, 2050, 2053, 2055. BofA Securities.

Competitive
The Tri-County Regional Vocation Technical School District, Massachusetts, is about to sell $140 million of GO school project loan chapter 70B bonds at 11 a.m. eastern Tuesday.