Municipals were little changed Tuesday as investors await a surge of new issuance to hit the market Wednesday and Thursday. U.S. Treasuries rallied out long and equities ended down.
Two weeks into the fourth quarter of the year, munis are posting negative returns in October, down 0.56%, bringing year-to-date returns down to 1.72%, said Jason Wong, vice president of municipals at AmeriVet Securities.
However, this is better than where returns were over the past two years, with the asset class seeing losses of 11.43% in 2022 and 0.66% in 2023, he noted.
Muni yields rose “significantly” last week as markets repriced expectations for a 25-basis-point rate cut at the next Fed meeting instead of a 50-basis-point one that the industry initially predicted upon the Fed starting its easing cycle, Wong said.
Yields rose by an average of 9.8 basis points across the curve as the “
Despite the pullback in munis over the last several weeks, Wong said munis should remain in positive territory to end 2024 as the pullback is likely a market correction.
Due to the underperformance relative to USTs, shorter muni-UST ratios moved higher, though the 30-year ratio closed lower by a “fraction” of a basis point, said Pat Luby, head of municipal strategy at CreditSights.
The two-year muni-to-Treasury ratio Tuesday at 63%, the three-year at 62%, the five-year at 63%, the 10-year at 69% and the 30-year at 85%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 63%, the three-year at 63%, the five-year at 62%, the 10-year at 67% and the 30-year at 82% at 3:15 p.m.
Mutual funds have seen $17.398 billion of inflows year-to-date, a “complete 180” of the previous two years with outflows of $145.16 billion in 2022 and $8.6 billion in 2023, Wong said.
Issuance slowed last week as new issues saw “mixed reception” with most deals two to three times oversubscribed but some, such as AA-rated hospital, were “revised wider to clear,” said Birch Creek strategists in a weekly report.
Supply ramps up this week to an estimated $13.361 billion, with several billion-dollar pricings on tap, according to LSEG data. Bond Buyer 30-day visible supply sits at $17.78 billion.
The holiday-shortened week will be “very busy,” as the new-issue slate includes two airport deals, several colleges and universities, three investment-grade hospitals, a large state GO and a big local GO, Luby said.
In the primary market Tuesday, Raymond James priced for Manchester, New Hampshire, (/AA-//) $106.675 million of sewer revenue green bonds, with 5s of 6/2026 at 2.61%, 5s of 2029 at 2.57%, 5s of 2034 at 2.97%, 5s of 2039 at 3.24%, 5s of 2044 at 3.65%, 5s of 2049 at 3.90% and 5.25s of 2054 at 3.95%, callable 6/1/2034.
In the competitive market, the Virginia Public School Building Authority (Aaa/AAA/AAA/) sold $133.94 million of special obligation school financing bonds to BofA Securities, with 5s of 10/2025 at 2.80%, 5s of 2029 at 2.50%, 5s of 2034 at 2.86%, 4s of 2039 at 3.47% and 4s of 2044 at 3.89%, callable 10/1/2033.
More issuance is on the horizon with the week of Oct. 21 seeing at least two sizable deals: $1.5 billion of John F. Kennedy International Airport Terminal 6 special facilities refunding bonds from the New York Transportation Development Corp. and $1.5 billion of future tax subordinate bonds from the New York Transitional Finance Authority, he noted.
AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.73% and 2.47% in two years. The five-year was at 2.44%, the 10-year at 2.78% and the 30-year at 3.69% at 3 p.m.
The ICE AAA yield curve saw small bumps three years and out: 2.75% (+1) in 2025 and 2.52% (+2) in 2026. The five-year was at 2.45% (-1), the 10-year was at 2.75% (-1) and the 30-year was at 3.62% (-2) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.77% (unch) in 2025 and 2.51% (+1) in 2026. The five-year was at 2.45% (unch), the 10-year was at 2.75% (unch) and the 30-year yield was at 3.64% (unch) at 3 p.m.
Bloomberg BVAL was little changed: 2.74% (unch) in 2025 and 2.49% (unch) in 2026. The five-year at 2.46% (unch), the 10-year at 2.73% (unch) and the 30-year at 3.63% (-1) at 3:30 p.m.
Treasuries saw gains.
The two-year UST was yielding 3.953% (flat), the three-year was at 3.860% (-2), the five-year at 3.855% (-5), the 10-year at 4.028% (-7), the 20-year at 4.374% (-9) and the 30-year at 4.314% (-10) at 3:30 p.m.
Primary to come:
Chicago (//A+/A+/) is set to price Thursday $1.575 billion of Chicago O’Hare International Airport general airport senior lien revenue bonds, consisting of $515.72 million of AMT refunding bonds, Series 2024C; $840.05 million of non-AMT refunding bonds, Series 2024D; $158.43 million of AMT bonds, Series 2024E; and $61.225 million of non-AMT bonds, Series 2024F. J.P. Morgan.
The New Jersey Transportation Trust Fund Authority (A2/A-/A/) is set to price Thursday $1.5 billion of transportation system bonds, consisting of tax-exempt 2024 Series A bonds and taxable 2024 Series B bonds, serials 2032-2039. BofA Securities.
The New Jersey Transportation Trust Fund Authority (A2/A-/A/A/) is also set to price Thursday $1.2 billion of transportation program bonds, consisting of $700 million of tax-exempts, Series 2024-AA, serials 2039-2042, and $500 million of taxables, Series 2024-BB, serials 2025-2027. BofA Securities.
The Southeast Energy Authority is set to price Wednesday $700 million of energy supply revenue bonds, Series 2024C. Goldman Sachs.
The Dormitory Authority of the State of New York (Baa3/BBB-//) is set to price Thursday $500 million of White Plains Hospital Obligated Group revenue bonds, serials 2038-2053, terms 2058, 2063. BofA Securities.
The West Contra Costa Unified School District, California, (/AA//) is set to price Wednesday $352.785 million of BAM-insured GOs. J.P. Morgan.
Orlando (/AAA/AAA/) is set to price Wednesday $149.27 million of water reclamation system revenue and refunding bonds, consisting of $132.18 million of improvement bonds, Series 2024A, serials 2025-2054, and $17.09 million of refunding bonds, Series 2024B, serials 2025-2032. BofA Securities.
Louisiana (Aa3/AA//) is set to price Wednesday $141.88 million of gasoline and fuels tax second lien revenue refunding bonds, 2024 Series A. Wells Fargo.
The Clear Creek Independent School District, Texas, (Aaa//AAA/) is set to price Wednesday $139.74 million of unlimited tax refunding bonds, consisting of $129.055 million of PSF-guaranteed bonds, Series 2024A, serials 2026-2040, and $10.685 million of million of non-PSF-guaranteed bonds. Series 2024B, serial 2029. Jefferies.
The Dormitory Authority of the State of New York (Baa3/BBB-//) is set to price Thursday $111.225 million of Montefiore Obligated Group Revenue bonds, serials 2025-2026, 2030-2044, term 2047. BofA Securities.
The Torrance Unified School District, California, (Aa2/AA//) is set to price Thursday $110.385 million of GOs. Piper Sandler.
The Grayson County Junior College District, Texas, (Aa2//AA/) is set to price Wednesday $104.85 million of GOs, serials 2028-2044, term 2049. BOK Financial Securities.
The Missouri Public Utilities Commission is set to price Wednesday $102.5 million of non-rated interim construction refunding notes, serials 2026. D.A. Davidson.
Competitive:
The California State Public Works Board (Aa3/A+/AA-/) is set to sell $210.31 million of various capital projects lease revenue various purpose bonds, Series 2024D, at 11:30 a.m. Wednesday.
Nevada is set to sell $116.51 million of GO limited tax capital improvement and historical preservation bonds, Series 2024A, at 11:30 a.m. Wednesday.
The Metropolitan Governments of Nashville and Davidson Counties, Tennessee, (Aa2/AA+//) is set to sell Thursday $314.47 million of GO improvement bonds, Series 2024C, at 10:45 a.m. eastern Thursday, $266.385 million of GO improvement bonds, Series 2024A, at 10:15 a.m. Thursday, and $205.805 million of GO improvement bonds, Series 2024B, at 10:30 a.m. Thursday.
Suffolk County, New York, is set to sell $164.415 million of public improvement serial bonds, Series 2024A, at 11 a.m. Thursday.