Municipals and U.S. Treasuries have been narrowly combined Tuesday and equities ended up.
The 2-year muni-UST ratio Tuesday was at 64%, the five-year at 62%, the 10-year at 71% and the 30-year at 90%, in accordance 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.
Muni yields noticed small cuts on the entrance finish of the curve and small bumps out lengthy, on the heels of final week’s selloff as “information suggesting more healthy employment and a bit extra inflationary stress catalyzed a correction in bond yields, the tax-exempt entrance finish specifically being repriced,” mentioned Matt Fabian, a companion at Municipal Market Analytics.
Following final week, the “total municipal provided facet curve seems to be oversold and trending worse, suggesting that underwriters not solely added again sufficient yield to make sure demand, but additionally inoculated the first market in opposition to modest near-term swings,” he mentioned.
In different phrases, “strong worth ought to be out there, specifically up entrance for patrons; with issues requiring a bit extra, however not undue, warning on the very lengthy finish,” Fabian mentioned.
Ranges set final week “seem to have some endurance” barring any main drivers, however an more and more seemingly authorities shutdown might power change, “particularly if the administration accelerates job cuts or makes different decisions (and thus amplifies occasion and headline dangers) in response,” he mentioned.
“At midnight on Tuesday, funding for the U.S. authorities expires; if a brand new spending plan or short-term persevering with decision shouldn’t be handed by that point, it will immediate a authorities ‘shutdown’ for the primary time since 2018,” mentioned J.P. Morgan strategists led by Peter DeGroot.
Within the occasion of a shutdown, UST yields might fall, however “on condition that the debt ceiling has already been handled, our charges workforce would anticipate any near-term decline to be pretty restricted,” they mentioned.
“Along with empirical proof that charges drop when the federal government shutters, different impacts on the municipal market have been muted in short authorities shutdowns, with solely non permanent disruption of associated earnings tax receipts and federal funds,” J.P. Morgan strategists mentioned.
A latest Workplace of Administration and Funds report could point out “longer-term dangers for municipal credit in areas with a excessive share of their workforce employed by the federal authorities, within the occasion a signed CR doesn’t materialize, and if measures outlined within the directive are literally enacted and survive an anticipated court docket problem,” they mentioned.
Elsewhere, October has traditionally not been “notably variety to the municipal market, because it tends to be one of many heavier provide months of the yr,” mentioned Daryl Clements, a portfolio supervisor at AllianceBernstein.
“Whereas this yr could differ, given the deluge of issuance in the course of the first half, the chances nonetheless favor a comparatively wholesome quantity of provide in October,” he mentioned.
With some components of the curve nonetheless wanting “modestly costly,” a number of weeks of heavy provide might create catalysts for relative tax-exempt underperformance, Clements mentioned.
“That mentioned, any pockets of weak point ought to be considered as alternatives so as to add publicity and reap the benefits of extra engaging valuations — notably on the lengthy finish of the curve,” he mentioned.
Within the main market on Tuesday, Morgan Stanley priced for Power Southeast (/A//) $799.015 million of power provide income bonds, Collection 2025B, with 5s of 9/2027 at 3.71%, 5s of three/2030 3.85%, 5s of 9/2030 at 3.88%, 5s of three/2033 at 4.34% and 5s of 9/2033 at 4.35%, callable 6/2033.
J.P. Morgan priced for the Allegheny County Sanitary Authority (Aa3/AA-//) $372 million of sewer income bonds, with 5s of 12/2025 at 2.64%, 5s of 2030 at 2.51%, 5s of 2035 at 3.15%, 5s of 2040 at 3.83%, 5s of 2045 at 4.25%, 5s of 2050 at 4.53%, 5s of 2055 at 4.58% and 5.25s of 2058 at 4.54%, callable 12/2034.
BofA Securities priced for Norfolk, Virginia, (/AAA/AA+/) $256.27 million of GO capital enchancment and refunding bonds. The primary tranche, $241.485 million of GO capital enchancment and refunding bonds, Collection 2025A, with 5s of 9/2026 at 2.41%, 5s of 2030 at 2.38%, 5s of 2035 at 3.02%, 5s of 2040 at 3.66% and 5s of 2045 at 4.11%, callable 9/2034.
The second tranche, $14.785 million of taxable GO capital enchancment bonds, Collection 2025B, priced all bonds at par: with 3.798s of 9/2026 and three.755s of 2028, noncall.
BofA Securities priced for the New Mexico Finance Authority (Aa1/AAA//) $216.695 million of subordinate lien public challenge revolving fund income bonds, Collection 2025C, with 5s of 12/2025 at 2.58%, 5s of 2030 at 2.50%, 5s of 2035 at 3.10%, 5s of 2040 at 3.76%, 5s of 2045 at 4.24%, 5s of 2050 at 4.45% and 5s of 2054 at 4.51%, callable 12/2035.
BofA Securities priced for the Maine State Housing Authority (Aa1/AA+//) $117.73 million of social mortgage buy bonds, Collection 2025D, with all bonds priced at par — 2.85s of 11/2028, 2.95s of 2030, 3.85s of 2035, 4.5s of 2040, 4.85s of 2045 and 4.95s of 2050 — aside from 6s of 2055 at 3.51%, callable 11/2033.
Wells Fargo priced for the Wisconsin Housing and Financial Growth Authority (Aa3/AA+//) $105.115 million of non-AMT housing income bonds. The primary tranche, $39.97 million of Collection 2025A bonds, priced all bonds at par: 2.9s of 11/2027, 3.1s of 5/2030, 3.15s of 11/2030, 3.85s of 5/2035, 3.9s of 11/2035, 4.5s of 11/2040, 4.95s of 11/2045, 5s of 11/2050, 5.05s of 11/2055 and 5.15s of 11/2059, callable 5/2034.
The second tranche, $65.145 million of Collection 2025B bonds, priced 3.05s of 11/2046 with a put/tender date of 5/2027 at par, callable 5/2026.
AAA scales
MMD’s scale was narrowly combined: 2.38% (unch) in 2026 and a pair of.30% (+2) in 2027. The five-year was at 2.32% (+2), the 10-year was at 2.92% (unch) and the 30-year was at 4.24% (-2) at 3 p.m.
The ICE AAA yield curve was bumped a foundation level outdoors two years: 2.36% (+4) in 2026 and a pair of.26% (unch) in 2027. The five-year was at 2.30% (-1), the 10-year was at 2.92% (-1) and the 30-year was at 4.24% (-1) at 4 p.m.
The S&P World Market Intelligence municipal curve was bumped three foundation factors out lengthy: The one-year was at 2.36% (unch) in 2025 and a pair of.26% (unch) 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 4.24% (-3) at 3 p.m.
Bloomberg BVAL was narrowly combined: 2.28% (+1) in 2025 and a pair of.25% (+1) in 2026. The five-year at 2.29% (+1), the 10-year at 2.90% (unch) and the 30-year at 4.24% (-1) at 4 p.m.
Treasuries have been narrowly combined.
The 2-year UST was yielding 3.603% (-3), the three-year was at 3.615% (-1), the five-year at 3.731% (flat), the 10-year at 4.145% (+1), the 20-year at 4.699% (+1) and the 30-year at 4.726% (+1) 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, Collection 2025C. Wells Fargo.
The Decrease Alabama Gasoline District (A1///) is about to cost $678.14 million of gasoline challenge income refunding bonds, Collection 2025A. Goldman Sachs.
The Cherry Creek Faculty 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 services income bonds, Collection 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, Collection 2025 (Baa1/A//), and $47.585 million of subordinate lien bonds, Collection 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, Collection 2025A. Loop 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, Collection 2025A. Loop Capital Markets.
The Wisconsin Housing and Financial Growth Authority (Aa3/AA+//) is about to cost $105.34 million of non-AMT housing income bonds, consisting of $39.92 million of Collection 2025A bonds and $65.42 million of Collection 2025B bonds. Wells Fargo.
