Municipals had been barely firmer Wednesday as U.S. Treasuries richened and equities ended combined.
The 2-year muni-UST ratio Wednesday was at 61%, the five-year at 65%, the 10-year at 76% and the 30-year at 94%, in accordance with Municipal Market Knowledge’s 3 p.m. ET learn. ICE Knowledge Companies had the two-year at 60%, the five-year at 64%, the 10-year at 74% and the 30-year at 92% at a 4 p.m. learn.
The Funding Firm Institute Wednesday reported inflows of $356 million for the week ending Aug. 27, following $732 million of outflows the earlier week.
Trade-traded funds noticed inflows of $1.219 billion after $2.555 billion of inflows the week prior, per ICI information.
Muni bond buying and selling exercise main as much as Labor Day was restricted and resulted in “AAA tax-exempt yields a [basis point] or two richer alongside a barely steeper yield curve,” mentioned Matt Fabian, a associate at Municipal Market Analytics.
Curve steepening, “pushed once more final week by U.S. Treasury actions incorporating extra investor confidence {that a} Fed[eral Reserve] price reduce is imminent” persists, that means “there is just too a lot uncertainty at current for lengthy bonds to rally by a lot,” he added.
That uncertainty contains final week’s court docket resolution on President Donald Trump’s tariffs being declared unlawful, pending evaluate by the Supreme Courtroom, which Fabian notes is “doubtlessly, a extremely disruptive improvement serving to bonds and shares unload in the present day.”
In August, investor response to the Fed’s coverage strikes, mixed with “outsized constructive internet provide [and] combined financial information,” noticed tax-exempts outperform throughout the curve as 2s30s continued to bear steepen,” mentioned Peter Block, managing director and municipal strategist at Ramirez.
The AAA 2s/30s unfold has widened by 11 foundation factors because the begin of final month and 128 foundation factors because the starting of the 12 months, in accordance with Refinitiv MMD.
“As soon as once more, new difficulty traders had been selective on construction, sector, state and high quality, reinforcing a bifurcated market bereft of breadth and liquidity for period and credit score,” Block mentioned.
Secondary market exercise for the month “remained under common as new difficulty throughput dominated flows,” whereas vendor steadiness sheets are close to capability, he added.
Major muni catalysts embrace the potential for two 25-basis-point price cuts from the Federal Open Market Committee via year-end, an unsure commerce and geopolitical panorama and constructive internet provide, in accordance with Block.
Trying solely at inner elements, “the municipal market itself remains to be doing effectively, fairly by way of the short-term drop in new difficulty provide amid a extra lasting discount in reinvestment flows,” Fabian mentioned.
“The key stays a nominal AAA yield curve low cost and steep sufficient to draw [separately managed account]/earnings consumers,” as August ended with greater than 1.5 million trades, he mentioned, including the wavering value development could also be undercutting managed mutual fund flows.
12 months-to-date, exchange-traded funds have obtained 2.3 occasions extra flows in comparison with their conventional mutual fund friends, whose NAVs are flat or detrimental throughout the identical time period, Fabian mentioned.
Present MMA predictions say “the brand new difficulty calendar will start to select up shortly, persevering with into year-end,” supplied there is no such thing as a main correction or selloff, he mentioned, including full-year provide figures are anticipated to achieve $576 billion.
Within the main market Wednesday, BofA Securities priced for Delray Seaside, Florida, (Aa3/AA-//) $148.675 million of water and sewer income enchancment bonds, 2025, with 5s of 10/2029 at 2.40%, 5s of 2030 at 2.52%, 5s of 2035 at 3.43%, 5s of 2040 at 4.20%, 5s of 2045 at 4.70%, 5.25s of 2050 at 4.86% and 5.25s of 2055 at 4.89%, callable 10/1/2035.
Within the aggressive market, the Santa Clara Unified College District, California, (Aaa/AAA/) is ready to promote $190 million of Election of 2018 GOs, to Morgan Stanley, with 4s of seven/2026 at 1.89%, 4s of 2030 at 2.02% and 4s of 2033 at 2.49%, noncall.
AAA scales
MMD’s scale bumped two foundation factors eight years and out: The one-year was at 2.19% (unch) and a pair of.21% (unch) in two years. The five-year was at 2.38% (unch), the 10-year at 3.21% (-2) and the 30-year at 4.60% (-2) at 3 p.m.
The ICE AAA yield curve was bumped one to 3 foundation factors: 2.24% (-1) in 2026 and a pair of.19% (-2) in 2027. The five-year was at 2.40% (-2), the 10-year was at 3.16% (-2) and the 30-year was at 4.58% (-3) at 4 p.m.
The S&P International Market Intelligence municipal curve was bumped as much as two foundation factors: The one-year was at 2.19% (unch) in 2025 and a pair of.21% (unch) in 2026. The five-year was at 2.38% (unch), the 10-year was at 3.22% (-2) and the 30-year yield was at 4.60% (-2) at 4 p.m.
Bloomberg BVAL was bumped one to 2 foundation factors: 2.16% (-1) in 2025 and a pair of.18% (-1) in 2026. The five-year at 2.34% (-1), the 10-year at 3.17% (-2) and the 30-year at 4.58% (-1) at 4 p.m.
Treasuries noticed positive aspects.
The 2-year UST was yielding 3.614% (-3), the three-year was at 3.581% (-3), the five-year at 3.691% (-3), the 10-year at 4.218% (-4), the 20-year at 4.85% (-6) and the 30-year at 4.899% (-6) close to the shut.
Major to return
The Dormitory Authority of the State of New York (Aa1//AA+/) is ready to cost Thursday $2.337 billion of common objective state private earnings tax income bonds, Sequence 2025C. BofA Securities.
The Massachusetts College Constructing Authority (/AA/AA+/) is ready to cost Thursday $1.892 billion of social bonds, consisting of $488.845 million of subordinated devoted gross sales tax bonds, Sequence 2025A, and $1.404 billion of refunding bonds, Sequence 2025B, BofA Securities.
The Michigan State Housing Improvement Authority (/AA+//) is ready to cost Thursday $360.06 million of rental housing income bonds, Sequence 2025A-1. BofA Securities.
The Los Angeles Division of Water and Energy (Aa2//AA-/AA) is ready to cost Thursday $166.045 million of water system income bonds, Sequence 2025B. BofA Securities.
The Regents of the College of Colorado (Aa1//AA+/) is ready to cost Thursday $140.535 million of college enterprise income bonds, consisting of $76.555 million of Sequence C-1 and $63.98 million of Sequence C-2 refunding bonds. Stifel.
The Connecticut Well being and Instructional Services Authority (A3/A-//) is ready to cost Thursday $129.66 million of Quinnipiac College difficulty income refunding bonds, Sequence O. Barclays.
The Riverside Unified College District (Aa2///) is ready to cost Thursday $106.33 million of GOs, consisting of $40 million of Election of 2016 GOs, Sequence D, and $66.33 million of 2025 GO refunding bonds. Piper Sandler.
Aggressive
Brownsville, Texas, (Aa3/AA+/) is ready to promote $143.86 million of mixture tax and income certificates of obligation, Sequence 2025A, at 11 a.m. on Thursday.
The Hartford County Metropolitan District, Connecticut, (Aa2/AA//) is ready to promote $100 million of GOs at midday on Thursday.
Jessica Lerner contributed to this report.
