Bond markets have been comparatively quiet with munis and U.S. Treasuries cheapening barely, whereas equities ended up.
Munis noticed cuts, albeit small ones, for the primary time in almost two weeks as yields rose as much as 4 foundation factors, relying on the dimensions.
The prolonged rally took a little bit of a pause over the previous week, when yields have been solely barely firmer every buying and selling session on Monday by Wednesday after which barely weaker on Thursday.
Generally, the market tends to get “overdone,” so there’ll in all probability be a pullback in costs for some time and digest slightly bit extra provide, stated Tim McGregor, managing companion at Riverbend Capital Advisors.
“The momentum in all probability carried issues slightly too far,” he stated.
The 2-year muni-UST ratio Thursday was at 57%, the five-year at 59%, the 10-year at 70% and the 30-year at 89%, in keeping with Municipal Market Information’s 3 p.m. ET learn. ICE Information Companies had the two-year at 57%, the five-year at 58%, the 10-year at 70% and the 30-year at 90% at a 4 p.m. learn.
Provide has been manageable for a bit, however there will likely be a very good pickup within the fall, McGregor stated.
Munis returns are good, which is a giant transfer, more than likely carried by the market’s constructive tone, he stated.
Funding-grade munis are seeing beneficial properties of two.72% month-to-date and three.05% year-to-date. Excessive-yield munis are seeing constructive returns of three.02% MTD and 1.68% YTD. Taxable munis are up 1.64% MTD and 6.80% YTD.
Retail tends to chase returns, as cash has come into mutual funds and exchange-traded funds, McGregor stated.
“The NAV is shifting after which they begin piling on,” he famous.
With September half over, “allocations by tenor have adopted an upward linear path as provide pushed the year-to-date complete above $400 billion,” stated Kim Olsan, senior fastened earnings portfolio supervisor at New Sq. Capital.
“One other easing cycle — if maybe prone to be staggered — gave sellers of lengthy bonds higher seems from potential patrons with the intense steepness of the muni curve,” she stated.
Generic AAA muni 30-year/10-year slopes are greater than double the identical UST curve at 130 foundation factors, Olsan stated.
Extension has been “rewarded” in a giant method, because the one- to two-year index is seeing beneficial properties of 0.32% month-to-date, whereas a 22-year and longer index acquire is 4.50% to this point in September, she stated.
“The outperformance in simply a few weeks of long-term bonds has helped 2025 outcomes, however the class continues to be lagging the broad market by about 230 foundation factors,” Olsan stated.
“Outcomes on the high quality stage have held impartial amongst Aaa, AA and single-A bonds (up 2.6% to 2.8% this month), however some threat taking is being inspired within the Baa-rated vary the place in two weeks’ time beneficial properties stand at 3.2%,” she stated.
There may be “warning to construct is inside 5 years, as curves are inverted from 2026 to 2030, however extra importantly, AAA-rated bonds carry yields at or by 2.00%,” Olsan stated.
A sale of Georgia GO 5s due 2028 at 2.01% “begs the query of balancing patrons’ wants with honest worth — with a mere 57% ratio to the three-year UST,” she stated.
Secondary trades (fastened coupons) with as much as three-year maturities account for 10% of all quantity month-to-date, ticking down 2% from the prior 90 days, Olsan stated.
“Given wealthy valuations on this vary, quick name buildings might be anticipated to supply some concession within the meantime,” she stated.
Fund flows
Traders added $1.045 billion to municipal bond mutual funds within the week ended Wednesday, following $2.182 billion of inflows the prior week, in keeping with LSEG Lipper knowledge. That is some “moderation” after final week’s huge influx, in keeping with J.P. Morgan strategists, led by Peter DeGroot.
Excessive-yield funds noticed inflows of $424.8 million in comparison with inflows of $1.064 billion the earlier week.
Tax-exempt municipal cash market funds noticed outflows of $1.315 billion for the week ending Sept. 16, bringing complete belongings to $136.951 billion, in keeping with 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 2.35%.
Taxable money-fund belongings noticed $8.352 billion pulled, bringing the whole to $7.112 trillion.
The common seven-day easy yield was at 3.95%.
The SIFMA Swap Index was at 2.70% on Wednesday in comparison with the earlier week’s 2.60%, the sixth straight week that the Index has remained in a really tight 20 foundation level vary of two.60%-2.80%, stated Rick White, an unbiased guide.
“We’re taking a pleasant break from the intense volatility that we had gotten accustomed to,” he stated.
These smaller weekly adjustments in SIFMA “have been pushed by comparatively steady unsold supplier inventories, which have been averaging between $2.5 billion to $3.5 billion for the previous month and a half,” White stated.
CUSIP requests rise
In August, the mixture complete of identifier requests for brand new municipal securities — together with municipal bonds, long-term and short-term notes, and business paper — rose 5.5% versus July totals.
On a year-over-year foundation, total municipal volumes have been up 20.4% by the top of August.
Texas led state-level municipal request quantity with a complete of 310 new CUSIP requests in August, adopted by New York (181) and California (85).
For the precise class of municipal bonds, there was a rise of 4.2% month-over-month, however these requests are nonetheless up 20.7% on a year-over-year foundation.
AAA scales
MMD’s scale was lower two foundation factors outdoors of 1 yr: The one-year was at 2.12% (unch) and a pair of.02% (+2) in two years. The five-year was at 2.15% (+2), the 10-year at 2.88% (+2) and the 30-year at 4.21% (+2) at 3 p.m.
The ICE AAA yield curve was lower two to 4 foundation factors: 2.10% (+4) in 2026 and a pair of.04% (+4) in 2027. The five-year was at 2.13% (+3), the 10-year was at 2.84% (+3) and the 30-year was at 4.21% (+2) at 4 p.m.
The S&P International Market Intelligence municipal curve noticed small cuts two years and out: The one-year was at 2.11% (unch) in 2025 and a pair of.01% (+2) in 2026. The five-year was at 2.16% (+2), the 10-year was at 2.88% (+2) and the 30-year yield was at 4.21% (+2) at 3 p.m.
Bloomberg BVAL was lower as much as two foundation factors: 2.03% (unch) in 2025 and a pair of.00% (unch) in 2026. The five-year at 2.10% (+1), the 10-year at 2.83% (+1) and the 30-year at 4.18% (+2) at 4 p.m.
Treasuries noticed small losses.
The 2-year UST was yielding 3.569% (+2), the three-year was at 3.551% (+1), the five-year at 3.669% (+1), the 10-year at 4.113% (+2), the 20-year at 4.696% (+4) and the 30-year at 4.731% (+4) on the shut.
