The bond market firmed Thursday as each muni and U.S. Treasury yields fell, and equities ended up.
Muni yields have been bumped as much as 5 foundation factors, relying on the dimensions, whereas UST yields fell three to 5 foundation factors.
The 2-year muni-UST ratio Thursday was at 61%, the five-year at 64%, the 10-year at 76% and the 30-year at 93%, based on Municipal Market Information’s 3 p.m. ET learn. ICE Information Providers had the two-year at 60%, the five-year at 64%, the 10-year at 74% and the 30-year at 93% at a 4 p.m. learn.
Issuance via the top of August is at $386.689 billion, up 14.9% from $336.478 billion over the identical interval in 2024, based on LSEG.
Whereas provide is about to interrupt data once more this 12 months, the query is whether or not this fast tempo of issuance can proceed.
“To a point, inflation and the price of building have added to the upper new concern cycle; additionally spending down the COVID reduction funds, could have escalated the brand new concern [market] during the last 18 months or so, and maybe that begins to ebb over time,” stated Doug Vissicchio, head of municipal gross sales, underwriting and buying and selling at UBS.
And as issuance “moderates” for the remainder of the 12 months now that the tax exemption was not eradicated and the tax invoice is regulation, whole returns ought to get well, stated Cooper Howard, a set revenue strategist at Charles Schwab.
Munis are seeing good points of 0.39% year-to-date, largely on account of elevated issuance, he stated.
Larger issuance pulled costs decrease due to a provide/demand imbalance, Howard stated.
Issuance tends to be longer out the curve, and demand, “the place individuals really feel a bit safer at occasions,” is on the quick finish of the curve, Vissicchio stated, resulting in the muni curve being twice as steep because the UST curve.
“That speaks to the retail demand part coming in so aggressively within the quick finish,” he stated.
Moreover, all year long, retail has stayed resilient, Vissicchio stated.
Banks, although, have been web sellers, with some high-profile portfolio gross sales this summer season, and there’s not sufficient cash coming in from insurance coverage corporations and crossover consumers to maneuver the needle on the lengthy finish, based on Vissicchio.
The secondary market is pushed by the promoting of older structured bonds to purchase the newer, higher name constructions, he stated.
“There’s extra leverage this 12 months coming in via the usage of tender possibility bond applications. There’s extra utilization because the curve is steep, and that turns into a helpful commerce for these funds which might be utilizing TOB constructions,” Vissicchio stated.
Elsewhere, Howard expects default charges to stay low for the remainder of the 12 months, noting munis default a lot much less typically than company bonds with comparable credit score rankings.
“Though some issuers face dangers, resembling diminished federal funding, a slowdown in tax revenues and better bills, we anticipate most issuers will be capable to adequately handle via the headwinds,” he stated.
Within the main market Thursday, BofA Securities priced for the Dormitory Authority of the State of New York (Aa1//AA+/) $2.059 billion of tax-exempt basic goal state private revenue tax income bonds, Collection 2025C, with 5s of three/2027 at 2.25%, 5s of 2030 at 2.65%, 5s of 2035 at 3.43%, 5s of 2040 at 4.18%, 5s of 2045 at 4.70%, 5.25s of 2050 at 4.83% and 5s of 2055 at 4.93%, callable 9/2035.
BofA Securities priced for the Michigan State Housing Growth Authority (/AA+//) $360.17 million of non-AMT rental housing income bonds, Collection 2025A-1, at par, with 2.875s of 4/2028, 2.95s of 10/2028, 3.15s of 4/2030, 3.3s of 10/2030, 4s of 4/2035, 4.125s of 10/2035, 4.875s of 10/2040, 5.15s of 10/2045, 5.25s of 10/2050, 5.3s of 10/2055, 5.4s of 10/2060 and 5.50s of 10/2068, callable 10/2033.
BofA Securities priced for the Los Angeles Division of Water and Energy (Aa2//AA-/AA/) $166.045 million of water system income bonds, Collection 2025B, with 5s of seven/2031 at 2.95% and 5s of 2035 at 3.53%, noncall.
Barclays priced for the Connecticut Well being and Academic Amenities Authority (A3/A-//) $129.42 million of Quinnipiac College concern income refunding bonds, Collection O, with 5s of seven/2026 at 2.44%, 5s of 2030 at 2.69%, 5s of 2035 at 3.53% and 5s of 2036 at 3.70%, callable 7/2035.
Within the aggressive market, Brownsville, Texas, (Aa3/AA+//) offered $143.86 million of mixture tax and income certificates of obligation, Collection 2025A, to BofA Securities, with 5s of two/2027 at 2.37%, 5s of 2030 at 2.60%, 5s of 2035 at 3.44%, 5s of 2040 at 4.23%, 5s of 2045 at 4.78% and 5s of 2046 at 4.83%, callable 2/2035.
Fund flows
Traders added $672.3 million to municipal bond mutual funds within the week ended Wednesday, following $590.4 million of inflows the prior week, based on LSEG Lipper information.
Excessive-yield funds noticed inflows of $238.1 million in comparison with inflows of $126.3 million the earlier week.
Tax-exempt municipal cash market funds noticed outflows of $850.7 million for the week ending Sept. 2, bringing whole property to $136.161 billion, based on the Cash Fund Report, a weekly publication of EPFR.
The common seven-day easy yield for all tax-free and municipal money-market funds rose to 2.52%.
Taxable money-fund property noticed $39.469 billion added, bringing the overall to $7.077 trillion.
The common seven-day easy yield was at 3.97%.
The SIFMA Swap Index was at 2.63% on Wednesday in comparison with the earlier week’s 2.73%.
AAA scales
MMD’s scale noticed bumps exterior one 12 months: The one-year was at 2.21% (+2) and a pair of.18% (-3) in two years. The five-year was at 2.35% (-3), the 10-year at 3.16% (-5) and the 30-year at 4.55% (-5) at 3 p.m.
The ICE AAA yield curve was bumped as much as 4 foundation factors: 2.24% (unch) in 2026 and a pair of.18% (-1) in 2027. The five-year was at 2.37% (-3), the 10-year was at 3.13% (-3) and the 30-year was at 4.55% (-3) at 4 p.m.
The S&P World Market Intelligence municipal curve was bumped as much as 5 foundation factors: The one-year was at 2.19% (unch) in 2025 and a pair of.17% (-4) in 2026. The five-year was at 2.34% (-4), the 10-year was at 3.17% (-5) and the 30-year yield was at 4.55% (-5) at 4 p.m.
Bloomberg BVAL was bumped one to 4 foundation factors: 2.15% (-1) in 2025 and a pair of.16% (-2) in 2026. The five-year at 2.31% (-3), the 10-year at 3.13% (-4) and the 30-year at 4.54% (-4) at 4 p.m.
Treasuries noticed good points.
The 2-year UST was yielding 3.587% (-3), the three-year was at 3.547% (-4), the five-year at 3.646% (-5), the 10-year at 4.166% (-5), the 20-year at 4.849% (-4) and the 30-year at 4.862% (-4) close to the shut.
Frank Gargano contributed to this story.
