Municipals were mixed Tuesday but outperformed the U.S. Treasury market while equities closed the session within the red.

Triple-A yield curves barely moved in comparison with the losses in USTs, which saw yields rise over the whole curve and as much as eight basis points 10-years and out, pushing ratios lower.

The 2-year municipal to UST ratio Tuesday was at 64%, the five-year at 64%, the 10-year at 65% and the 30-year at 79%, in response to Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 65%, the five-year at 63%, the 10-year at 65% and the 30-year at 79% at 4 p.m.

Munis are starting 2025 “well situated to distribute what could possibly be a record new-issue calendar,” particularly if Republicans threaten the tax exemption, said Matt Fabian, a partner at Municipal Market Analytics.

This week, a “manageable” calendar will likely be met with large demand. Still, underwriters needs to be cautious in “pushing yields too low too fast or risk retail/[separately managed account] pushback,” he said. December’s higher yields brought out SMA buyers, with 1.44 million trades, the third most on record, Fabian noted.

“Buyers are able to buy: an aid to underwriters already carrying inventories at their highest level since 1Q20 despite dealers like Citi having left the market,” Fabian said.

Such stronger demand is consistent with $27 billion of maturing and called principal in January, with next month set to be even larger, he said. Bond Buyer 30-day visible supply sits at $9.64 billion.

“And assuming the U.S. budget is as unbalanced because it seems, and that Republicans successfully raise the debt limit in 1H25, UST issuance needs to be very steep; municipal outperformance seems likely even when tax-exempt sales rival or exceed last yr,” he said.

Market participants agree this yr might be one other strong yr of bond issuance after a record yr of supply in 2024.

The muni market “easily absorbed” $500 billion-plus of issuance in 2024 due to mostly consistent inflows into mutual funds and exchange-traded funds, DWS strategists said.

“Exuberant” supply expectations in the primary quarter of 2025 could pose a challenge and turn out to be a “burden if yields don’t remain sufficiently high or if other headline risks interfere with buyers’ demand for tax-exempts,” Fabian said.

Weaker NAV performance in December and up to date outflows have led to mutual funds struggling, he said.

And “the fund-side of retail participation this yr will not be guaranteed,” Fabian noted.

DWS strategists echoed this sentiment noting, “further Treasury rate volatility or distractions from more favorable alternatives could on the very least moderate money invested into the municipal bond market,” they said. Nonetheless, “these dynamics could create periods of opportunity to purchase tax-exempt bonds at attractive yields in 2025.”

Fabian noted that banks’ — and presumably insurance firms’ — muni holdings “have been melting because the election and the related takeaway for the company tax rate,” further concentrating the muni buyer base in retail.

“Given the added uncertainty of impending tax code changes which might be most definitely to occur later within the yr resulting from other priorities like immigration and tariffs, many issuers could try and are available to market in the primary half of the yr to avoid any potential noise around tax policy,” said DWS strategists.

They noted supply could also surpass normal averages toward the tip of the yr if any tax code changes directly affect particular sectors — corresponding to previously -targeted higher education and other areas of personal activity, much like 2017, they noted.

In the first market Tuesday, Goldman Sachs priced for the Southeast Energy Authority (A1///) $980.855 million of energy supply revenue bonds, Series 2025A, with 5s of 6/2029 at 4.30%, 5s of 2030 at 4.34% and 5s of 2035 at 4.53%, make whole call.

Siebert Williams Shank priced for San Antonio (Aa1/AA+/AA/) $181.225 million of water system junior lien revenue refunding bonds, Series 2025A, with 5s of 5/2027 at 2.89%, 5s of 2030 at 2.96%, 5s of 2035 at 3.22% and 5s of 2039 at 3.46%, callable 5/15/2035.

Within the competitive market, The Tri-County Regional Vocation Technical School District, Massachusetts, sold $140 million of GO school project loan chapter 70B bonds, to Jefferies, with 5s of 6/2026, 5s of 2030 at 2.76%, 5s of 2035 at 2.96%, 4s of 2040 at 3.70%, 4s of 2045 at 4.05%, 4s of 2050 at 4.20% and 4s of 2054 at 4.25%, callable 6/1/2033.

AAA scales
MMD’s scale was little modified: The one-year was at 2.75% (-2) and a pair of.74% (-2) in two years. The five-year was at 2.84% (unch), the 10-year at 3.04% (unch) and the 30-year at 3.89% (unch) at 3 p.m.

The ICE AAA yield curve was mixed: 2.79% (-1) in 2026 and a pair of.78% (unch) in 2027. The five-year was at 2.80% (+1), the 10-year was at 3.01% (+1) and the 30-year was at 3.82% (+1) at 4 p.m.

The S&P Global Market Intelligence municipal curve was little modified: The one-year was at 2.82% (unch) in 2025 and a pair of.77% (unch) in 2026. The five-year was at 2.81% (-1), the 10-year was at 3.00% (unch) and the 30-year yield was at 3.82% (unch) at 4 p.m.

Bloomberg BVAL saw cuts 4 years and out: 2.87% (-5) in 2025 and a pair of.77% (unch) in 2026. The five-year at 2.85% (+1), the 10-year at 3.09% (+2) and the 30-year at 3.84% (+5) at 4 p.m.

Treasuries were weaker across the curve with the biggest losses out long.

The 2-year UST was yielding 4.299% (+3), the three-year was at 4.368% (+4), the five-year at 4.474% (+5), the 10-year at 4.693% (+8), the 20-year at 4.987% (+8) and the 30-year at 4.919% (+8) on the close.

Primary to come back
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.

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
Colorado is about to sell $475 million of education loan program tax and revenue anticipation notes at 11 a.m. Wednesday.