Munis noticed losses on the entrance finish of the curve however good points out lengthy, as U.S. Treasuries noticed yields fall barely in spots.
The 2-year muni-UST ratio Tuesday was at 69%, the five-year at 66%, the 10-year at 69% and the 30-year at 90%, based on Municipal Market Information’s 3 p.m. EDT learn. ICE Information Providers had the two-year at 68%, the five-year at 66%, the 10-year at 69% and the 30-year at 89% at a 3 p.m. learn.
The muni yield curve “continues to flatten, quickly, with long-end yields rallying with steadily constructive fund inflows, decrease latest provide and sharply slowing (to not point out more and more unsure) financial backdrop that is boosting demand for USTs,” mentioned Matt Fabian, president of Municipal Market Analytics.
Yields have fallen essentially the most in intermediate and longer maturities, however the entrance finish has cheapened to enchantment to “income-interested consumers,” he mentioned.
“That concession to nominal yields is compressing municipal time period spreads,” the curve caught between the early-buying individually managed accounts and the inflows of muni mutual funds and exchange-traded funds out lengthy, Fabian mentioned.
ETF inflows are at a file $29.1 billion year-to-date, breaking the 2022 file of $28.5 billion, which did not occur till virtually the top of the yr, he mentioned, citing Funding Firm Institute information.
“So even with [year-to-date] cumulative inflows from conventional mutual funds on the precise common ($13.1 billion) during the last 16 years, fund funding general (and thus demand for [total return rate]) is pretty good,” he mentioned.
Theoretically, time period spreads might hold grinding tighter between the 2 sorts of consumers, “implying that ‘worth’ consumers are going to maintain going decrease in credit score/ranking, preserving credit score spreads tight,” Fabian mentioned.
With the variety of disclosures of first-time cost defaults this yr vying for the bottom ranges since at the least 2019 — probably even beating 2018’s file lows — tight and tightening credit score spreads usually are not misplaced, he mentioned.
“There’s additionally each different information level: the federal shutdown, rising present harm to greater training, impending future harm to hospitals, worsening state and native budgets, greater prices through labor and provides, the slowing financial system, and many others.,” Fabian mentioned.
These dangers could possibly be “scaring ostensible bond issuers into subsequent yr, serving to each sellers and consumers handle the circulate at decrease yields,” he mentioned, noting this yr shall be one other file for issuance, however the complete shall be under $575 billion.
Elsewhere, investor demand for munis is powerful and will continue to grow, mentioned Tom Kozlik, managing director and head of public coverage and municipal technique at HilltopSecurities.
Muni mutual funds have seen virtually $9 billion of inflows since late August, and this pattern exhibits indicators of not letting up, he mentioned.
Demand might strengthen as “buyers anticipate the Federal Reserve’s possible path of price cuts, which might drive yields even decrease,” Kozlik mentioned.
As 2025 progresses, supply-demand dynamic is more likely to turn out to be “much less favorable” for consumers, he mentioned.
Traders who wait might miss the chance to safe “generationally enticing yields,” Kozlik mentioned.
For fixed-income buyers, the case for tax-exempt munis is “compelling,” he mentioned.
With volatility and uncertainty accelerating, munis provide “stability, tax-advantages, strong credit score high quality (with cautious credit score choice), and a confirmed observe file of resilience in market downturns,” he mentioned.
Within the main market Tuesday, Truist priced for CPS Power (Aa3/A+/AA-/) $514.83 million of variable price junior lien income and refunding bonds, Collection 2025A, with all bonds priced at par: 3.05s of two/2049 and three.1s of 2055.
Goldman Sachs priced for Power Southeast (A2///) $405.035 million of vitality provide income bonds, 2025 Collection A, with 5s of 11/2030 at 3.56% and 5s of 2035 at 4.04%, callable 8/1/2035.
BofA Securities priced for CPS Power (Aa2/AA-/AA-/) $346.515 million of income refunding bonds, New Collection 2025B, with 5s of two/2027 at 2.66%, 5s of 2030 at 2.62%, 5s of 2035 at 2.90% and 5s of two/2039 at 3.43%, callable 2/1/2036.
Oppenheimer priced for the Cumberland County Industrial Services and Air pollution Management Financing Authority (Aa1///) $250 million of Mission Aero strong waste disposal income bonds, with 3.125s of 12/2027 with a young date of 12/1/2026 at par, callable 5/1/2026.
Frost Financial institution priced for Comal Unbiased College District (Aaa///) $181.09 million of PSF-insured limitless tax refunding bonds, Collection 2025A, with 5s of two/2027 at 2.60%, 5s of 2030 at 2.55%, 5s of 2035 at 2.90%, 5s of 2040 at 3.51% and 5s of 2042 at 3.76%, callable 2/1/2035.
Wells Fargo priced for the Missouri Joint Municipal Electrical Utility Fee (A3//A/) $151.37 million of energy venture income bonds (Marshall Power Middle venture), with 5s of 1/2030 at 2.67%, 5s of 2035 at 3.03%, 5s of 2040 at 3.75%, 5s of 2045 at 4.34%, 5s of 2051 at 4.54% and 5.25s of 2056 at 4.54%, callable 1/1/2036.
BofA Securities priced for Pensacola, Florida (/A+/A+/A+/) $110.06 million of AMT airport income bonds, Collection 2025, with 5s of 10/2026 at 3.12%, 5s of 2030 at 3.10%, 5s of 2035 at 3.59%, 5.25s of 2040 at 4.04%, 5.25s of 2045 at 4.54%, 5.5s of 2050 at 4.63% and 5.5s of 2055 at 4.66%, callable 10/1/2035.
Within the aggressive market, Fayetteville, North Carolina, (Aa2/AA/AA/) offered $156.135 million of Public Works Fee income bonds, to BofA Securities, with 5s of three/2028 at 2.41%, 5s of 2030 at 2.44%, 5s of 2035 at 2.78%, 5s of 2040 at 3.42%, 4s of 2045 at 4.19%, 4s of 2051 at 4.36%, and 4s of 2055 at 4.40%, callable 3/1/2035.
Lawrence, Kansas, (Aa2///) offered $121.57 million of water and sewage system enchancment and refunding income bonds, to BofA Securities, with 5s of 11/2026 at 2.53%, 5s of 2030 at 2.45%, 5s of 2035 at 2.90%, 3.75s of 2041 at 3.82%, and 4.125s of 2045 at 4.15%, callable 11/1/2034.
AAA scales
MMD’s scale was bumped 5 years and out: 2.49% (+2) in 2026 and a pair of.39% (+2) in 2027. The five-year was 2.34% (unch), the 10-year was 2.72% (-2) and the 30-year was 4.11% (-2) at 3 p.m.
The ICE AAA yield curve was bumped in spots exterior 5 years: 2.45% (+2) in 2026 and a pair of.36% (+1) in 2027. The five-year was at 2.36% (unch), the 10-year was at 2.75% (-2) and the 30-year was at 4.08% (unch) at 3 p.m.
The S&P World Market Intelligence municipal curve was bumped out lengthy: The one-year was at 2.46% (unch) in 2025 and a pair of.38% (unch) in 2026. The five-year was at 2.34% (unch), the 10-year was at 2.72% (-3) and the 30-year yield was at 4.09% (-2) at 3 p.m.
Bloomberg BVAL was blended: 2.43% (+3) in 2025 and a pair of.38% (+2) in 2026. The five-year at 2.30% (+5), the 10-year at 2.72% (-3) and the 30-year at 4.06% (-1) at 3 p.m.
Treasuries have been barely firmer out lengthy.
The 2-year UST was yielding 3.454% (flat), the three-year was at 3.451% (-1), the five-year at 3.558% (-2), the 10-year at 3.958% (-2), the 20-year at 4.516% (-2) and the 30-year at 4.543% (-3) at 3:15 p.m.
Major to return
The New Jersey Transportation Belief Fund Authority (A1/A/A/A/) is ready to cost Wednesday $1.5 billion of transportation program bonds, Collection 2025 AA. J.P. Morgan.
The New York Metropolis Transitional Finance Authority (Aa1/AAA/AAA/) is ready to cost Wednesday $1.5 billion of future tax secured tax-exempt subordinate bonds, Fiscal 2026 Collection B. Siebert Williams Shank.
The Kentucky State Property and Buildings Fee (Aa3//AA-/) is ready to cost Wednesday $940.27 million of Mission No. 133 income bonds, consisting of $775 million of Collection A bonds and $165.27 million of Collection B refunding bonds. BofA Securities.
The Sacramento Metropolis Unified College District, California, (/AA//) is ready to cost Thursday $451.88 million of GO bonds, consisting of $262.5 million of GO 2020 Election (Measure H) bonds, Collection C; $143 million of GO 2024 Election (Measure D) bonds, Collection A; $9.855 million of 2025 GO refunding bonds, Collection A; and $36.525 million of 2025 GO refunding bonds, Collection B. Loop Capital Markets.
North Slope Borough, Alaska, (/AA//AA+/) is ready to cost Wednesday $186.75 million of GOs. Jefferies.
The Oklahoma Metropolis Water Utilities Belief (Aaa/AAA//) is ready to cost Thursday $185.91 million of utility system income refunding and enchancment bonds. Morgan Stanley.
The Conroe Unbiased College District, Texas, (Aaa/AAA//) is ready to cost Wednesday $185.14 million of PSF-insured limitless tax refunding bonds. RBC Capital Markets.
The Glendale Industrial Improvement Authority, Arizona, (/AA-/AA/) is ready to cost Thursday $150 million of Midwestern College income. Raymond James.
Metrocare Providers (Aa3///) is ready to cost Wednesday $142.49 million of income bonds. Raymond James.
The Maryland Well being and Larger Instructional Services Authority (A1/AA//) is ready to cost Wednesday $135.565 million of TidalHealth problem income bonds, Collection 2025C. KeyBanc.
The Village Group Improvement District No. 16, Florida, is ready to cost Thursday $127 million of nonrated particular evaluation income bonds. Jefferies.
The Colorado Well being Services Authority (/A-//) is ready to cost Thursday $125 million of Craig Hospital Mission hospital income bonds, consisting of $105 million of Collection A and $20 million of Collection B. RBC Capital Markets.
The South Carolina Scholar Mortgage Corp. (/AA//) is ready to cost Thursday $112.1 million of taxable senior scholar mortgage income bonds, Collection 2025A. RBC Capital Markets.
Oregon (Aa1/AA+/AA+/) is ready to cost Thursday $109.44 million of GOs, Collection 2025K. Morgan Stanley.
The IPS Multi-College Constructing Corp., Indiana, (/AA+//) is ready to cost Wednesday $107.75 million of social advert valorem property tax first mortgage bonds. Stifel.
The Mission Financial Improvement Corp. (A1///) is ready to cost Wednesday $100 million of Vinton Metal LLC Mission strong waste disposal income bonds. Jefferies.
Aggressive
Suffolk County, New York, (/AA-/AA-/) is ready to promote $188.735 million of public enchancment serial bonds, Collection 2025A, at 11 a.m. Thursday.
Henrico County, Virginia, (///AAA/) is ready to promote $125 million of water and sewer system income bonds, Collection 2025D, at 10:30 a.m. Thursday.
