Munis have been little modified Monday as consideration turned to the rising risk of a federal authorities shutdown. U.S. Treasury yields fell and equities ended up.
The 2-year muni-UST ratio Monday was at 63%, the five-year at 61%, the 10-year at 71% and the 30-year at 91%, in keeping with Municipal Market Knowledge’s 3 p.m. ET learn. ICE Knowledge Companies had the two-year at 62%, the five-year at 61%, the 10-year at 70% and the 30-year at 90% at a 4 p.m. learn.
The 2 chambers of Congress are unlikely to come back to a compromise by Tuesday’s midnight deadline for a “persevering with decision (CR) to increase the 2025 fiscal-year finances,” stated Jennifer Timmerman, an funding technique analyst at Wells Fargo Funding Institute.
A shutdown appears prone to start on Wednesday, Oct. 1, affecting “nonessential capabilities of the federal government’s discretionary spending,” she stated.
The shutdown is prone to have solely a “small and transitory financial affect,” however might result in some monetary market volatility, particularly if “delays in authorities financial studies obscure the trail of Federal Reserve price cuts,” Timmerman stated.
“Traditionally, fairness markets have centered on long-term earnings prospects and have demonstrated resiliency throughout previous shutdown episodes — notably throughout temporary authorities closures,” she stated.
Moreover, earlier cases of uncertainty, “because of disruption of knowledge releases or uncertainty over coverage decided by a data-dependent Fed, have quickly triggered a short flight-to-quality, benefiting perceived safe-haven property like gold together with U.S. Treasury securities and different high-quality debt,” Timmerman stated.
The muni market could also be shaken by a authorities shutdown, driving short-term volatility and wider spreads, stated James Pruskowski, a public finance strategist.
“Smaller, grant-dependent issuers will really feel the pinch as federal funding delays push borrowing prices greater,” whereas “Sturdy, diversified municipalities stay insulated, however valuations have tightened too quick and optimism is working forward of actuality,” he stated.
Buying and selling and new issuance could gradual as companies are sidelined and a short-term danger premium materializes, Pruskowski stated.
Elsewhere, “after beginning the week at aggressive valuations relative to taxables, notably within the entrance finish of the curve, it was no shock that the muni market struggled to maintain its outperformance,” Birch Creek strategists stated.
MMD’s scale noticed yields reduce as a lot as 13 foundation factors up entrance, whereas the 30-year “saved tempo” with USTs after rising two foundation factors, they stated.
The entrance finish noticed the biggest cuts “since hiring has slowed on the roles entrance and GDP rising to three.8% throughout Q2,” pushed UST yields greater and munis adopted swimsuit, stated Jason Wong, vice chairman of municipals at AmeriVet Securities.
A “deluge” of bids wanteds and a very hefty new problem calendar of $14 billion, “closely concentrated in shorter tenors,” made the entrance finish of the curve really feel “heavy,” in keeping with Birch Creek strategists, noting, “sellers and issuers alike seemed to reap the benefits of tax-exempt to taxable ratios within the mid 50% vary.”
By Thursday, Birch Creek strategists famous that “sellers reported they may purchase AAA paper within the excessive teenagers to mid +20s spreads [five years] and in, whereas odd tons have been buying and selling off 20-30bps.”
Moreover, “a number of new points struggled to clear and sellers have been left with balances on each negotiated and aggressive offers,” they stated.
Issuance is lighter this week at an estimated $6.8 billion and can provide “some reduction on the provision aspect, however ratios nonetheless hovering beneath 60% within the entrance finish go away little to be desired,” Birch Creek strategists stated.
AAA scales
MMD’s scale was unchanged: 2.38% in 2026 and a pair of.28% in 2027. The five-year was at 2.30%, the 10-year was at 2.92% and the 30-year was at 4.26% at 3 p.m.
The ICE AAA yield curve was bumped up two foundation factors out lengthy: 2.32% (+2) in 2026 and a pair of.26% (+1) in 2027. The five-year was at 2.30% (unch), the 10-year was at 2.94% (-2) and the 30-year was at 4.25% (-2) at 4 p.m.
The S&P World Market Intelligence municipal curve noticed cuts on the entrance finish: The one-year was at 2.36% (+2) in 2025 and a pair of.26% (+2) in 2026. The five-year was at 2.30% (unch), the 10-year was at 2.93% (unch) and the 30-year yield was at 4.27% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.27% in 2025 and a pair of.24% in 2026. The five-year at 2.28%, the 10-year at 2.91% and the 30-year at 4.25% at 4 p.m.
Treasuries noticed good points.
The 2-year UST was yielding 3.634% (-1), the three-year was at 3.634% (-2), the five-year at 3.742% (-2), the 10-year at 4.145% (-3), the 20-year at 4.691% (-4) and the 30-year at 4.711% (-4) on the shut.
Major to come back
The Los Angeles Division of Water and Energy (Aa2//AA-/AA/) is about to cost Wednesday $812.69 million of energy system income bonds, Sequence 2025C. Wells Fargo.
The Decrease Alabama Gasoline District (A1///) is about to cost $678.14 million of fuel venture income refunding bonds, Sequence 2025A. Goldman Sachs.
The Allegheny County Sanitary Authority (Aa3/AA-//) is about to cost Tuesday $421.61 million of sewer income bonds. J.P. Morgan.
Norfolk, Virginia, (/AAA/AA+/) is about to cost Tuesday $261.93 million of GO capital enchancment and refunding bonds, consisting of $247.145 million of tax-exempts and $14.785 million of taxables. BofA Securities.
The Park Creek Metropolitan District (/AA//) is about to cost Tuesday $244.475 million of senior restricted property tax supported income refunding and enchancment bonds. RBC Capital Markets.
Memphis, Tennessee, (Aa2//AA/) is about to cost Tuesday $233.165 million of Memphis Gentle Gasoline and Water Division electrical system income bonds. Raymond James.
The New Mexico Finance Authority (Aa1/AAA//) is about to cost Tuesday $216.68 million of subordinate lien public venture revolving fund income bonds, Sequence 2025C. BofA Securities.
The Cherry Creek College District No. 5, Colorado, (Aa1/AA//) is about to cost Wednesday $193.09 million of GO refunding bonds. RBC Capital Markets.
The Birmingham Particular Care Amenities Financing Authority, Alabama, (/AA-/AA-/) is about to cost Wednesday $187.87 million of well being care amenities income bonds, Sequence 2025A Youngsters’s Hospital. J.P. Morgan.
The North East Texas Regional Mobility Authority is about to cost Wednesday $181.52 million of income and refunding bonds, consisting of $133.935 million of senior lien bonds, Sequence 2025 (Baa1/A//), and $47.585 million of subordinate lien bonds, Sequence 2025B (Baa2/A-//). BofA Securities.
The Riverside County Public Finance Authority (/AA//) is about to cost Wednesday $175.75 million of tax allocation refunding income bonds, Sequence 2025A. Loop Capital Markets.
The Indiana Housing and Neighborhood Improvement Authority (Aaa///) is about to cost Tuesday $175.53 million of social single-family mortgage income bonds, consisting of $102.78 million of non-AMT Sequence 2025C-1 bonds, $57.75 million of taxable Sequence 2025C-2 bonds and $15 million of taxable pass-through Sequence 2025C-3 bonds. RBC Capital Markets.
Cook dinner County, Illinois, (/AA-/AA/AAA) is about to cost Wednesday $149.41 million of gross sales tax income bonds. Ramirez.
Riverside County is about to cost Thursday $148.1 million of Teeter Plan obligation notes, Sequence 2025A. Loop Capital Markets.
New Haven, Connecticut, (Baa1/A-/A-/) is about to cost Tuesday $118.72 million of refunding GOs. Cabrera Capital Markets.
The Maine State Housing Authority (Aa1/AA+//) is about to cost Tuesday $117.825 million of social mortgage buy bonds, Sequence 2025D. BofA Securities.
The Wisconsin Housing and Financial Improvement Authority (Aa3/AA+//) is about to cost $105.34 million of non-AMT housing income bonds, consisting of $39.92 million of Sequence 2025A bonds and $65.42 million of Sequence 2025B bonds. Wells Fargo.
Aggressive
The Arlington Financial Improvement Corp. (Aa1/AA//) is about to promote $70.86 million of taxable gross sales tax income bonds at 11 a.m. Jap Tuesday.
