Municipal were little modified Thursday as inflows into muni mutual funds topped $1 billion. U.S. Treasury yields rose and equities closed the session up.
Municipal bond mutual funds saw $1.288 billion of inflows for the week ending Wednesday, in accordance with LSEG Lipper. That compares to $303.2 million of inflows the prior week and marked 21 straight weeks of inflows.
High-yield funds saw $608.9 million of inflows compared with inflows of $150.3 million the week prior.
Most triple-A curves saw no movement in yields Thursday, while USTs yields rose inside 10 years and fell out long.
The 2-year municipal to UST ratio Thursday was at 60%, the five-year at 62%, the 10-year at 66% and the 30-year at 82%, in accordance with Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 62%, the five-year at 62%, the 10-year at 66% and the 30-year at 81% at 4 p.m.
The first calendar was light Thursday, with the previous couple of large deals pricing, and the new-issue slate has been “well received” this week, said Brad Libby, a fixed-income portfolio manager and credit analyst at Hartford Funds.
“For those who had any sort of spread, like within the 40 or 50 spread for either a A or AA- those are all five to 10 times oversubscribed and had anywhere from five to 10 basis point bumps after they did the reallocation,” he said.
The first had more high-yield paper for investors to digest Thursday. Goldman Sachs priced for Maricopa Industrial Development Authority (Ba1//BBB-/) $520 million of Grand Canyon University Project taxable education revenue bonds, with 7.375s of 10/2029 at par, callable 9/1/2029.
BofA Securities priced for the Charlotte-Mecklenburg Hospital Authority (Aa3/AA/AA/) $100 million of assorted rate health care revenue bonds, Series 2021B, with 3.25s of 1/2050 with a compulsory put date of 6/15/2027 at par.
Within the competitive market, Dallas (/AA-/AA/) sold $321.18 million of GO refunding and improvement bonds to J.P. Morgan, with 5s of two/2026 at 2.88%, 5s of 2029 at 2.79%, 5s of 2034 at 3.13%, 5s of 2039 at 3.39% and 4s of 2044 at 4.13%, callable 2/15/2034.
The town (/AAA/AA/) also sold $248.535 million of waterworks and sewer system revenue refunding bonds to BofA Securities, with 5s of 10/2026 at 2.68%, 5s of 2029 at 2.71%, 5s of 2034 at 3.07%, 5s of 2039 at 3.34%, 4s of 2044 at par, 4s of 2049 at 4.13% and 4.125s of 2054 at 4.24%, callable 10/1/2034.
Supply drops off considerably attributable to the Thanksgiving holiday, Libby noted.
Bond Buyer 30-day visible supply sits at $5.58 billion.
The rest of the 12 months will see an extra $25 billion to $35 billion in issuance, 75% to 80% of which can are available two weeks after Thanksgiving, Libby said.
After the primary two weeks of December, Libby noted supply will drop off over again.
Together with waning supply, there are still inflows into muni mutual funds and reinvestment money coming into the market, most of which got here Nov. 1, he said, noting more reinvestment money will hit of Dec. 1.
Following initial volatility, “the election didn’t knock the muni market all the way down to the mat: It’s early within the bout, but thus far, the end result of the election hasn’t resulted in any body blows to munis,” said Cooper Howard, a fixed-income strategist at Charles Schwab.
Munis offer a “compelling balance of risk and reward for investors in higher tax brackets,” which hasn’t modified attributable to the election’s end result, he said.
Absolute yields remain “attractive” for higher net-worth investors, but relative yields have turn into “further stretched” because the election, he said.
UST yields have risen across the curve, but “the identical cannot be said about muni yields,” Howard noted.
While yields have remained regular to barely firmer for around eight trading sessions, the query stays of where yields will go throughout the remainder of the 12 months, Libby said.
“It’ll come all the way down to what the tariffs are going to be and the way much of the immigration policy that [President-elect Donald] Trump desires to put through goes to take hold,” he said.
Trump holds slim majorities within the Senate and potentially the House of Representatives, so Libby said he was unsure what can be enacted, however the market will react to each “inflationary” events.
As well as, all eyes can be on what the Fed will do at its upcoming meetings, he said.
The market has currently priced in an 80% probability of a 25-basis-point rate cut at its December meeting, Libby said.
Next 12 months, he said, will see rates cut an extra 50 basis points to 100 basis points.
These events can even have an effect on fund flows.
If the pace and size of rate cuts increases, potentially prompted by increased fear of inflation, there could also be a pause on inflows, he said.
“Big rate moves higher are inclined to have a negative effect on muni fund flows,” Libby said.
CUSIP requests rose
The combination total of identifier requests for brand spanking new municipal securities, including municipal bonds, long-term and short-term notes, and industrial paper, rose 25% versus September’s totals, in accordance with CUSIP Global Services. On a year-over-year basis, overall municipal volumes are up 11.4%.
Texas led state-level municipal request volume with a complete of 169 latest CUSIP requests in October, followed by California (133) and Latest York (109).
For the particular category of municipal bond identifier requests, there was a rise of 34.5% month-over-month, but requests for municipal bond identifiers are up 11.5% year-over-year.