Municipals had been regular to weaker in spots, as U.S. Treasuries cheapened and equities ended up.
The 2-year muni-UST ratio Thursday was at 70%, the five-year at 66%, the 10-year at 68% and the 30-year at 90%, in response to Municipal Market Knowledge’s 3 p.m. EDT learn. ICE Knowledge Providers had the two-year at 70%, the five-year at 67%, the 10-year at 69% and the 30-year at 90% at a 4 p.m. learn.
There continues to be sturdy provide, with $17.9 billion dropped at market this week, serving to 2025 change into one other document yr, stated Jennifer Johnston, director of municipal bonds analysis at Franklin Templeton.
That could be a spike following Fed charge cuts as some issuers who might have been ready on the sidelines benefit from present charges, she stated.
“That is a part of what’s driving demand proper now, and a part of the explanation why we’re seeing flows flip round, which is nice, given the dimensions of the calendar that we’re anticipating,” she stated.
Constructive flows are returning to the muni market, mutual funds, together with exchange-traded funds, Johnston stated.
There’s demand on the market, and that demand will proceed. There’s cash coming in reasonably than reinvestment {dollars}, she stated.
The market has been in a position to digest all these offers, Johnston stated.
“We’re not going to be having big reinvestment months over the following few months, not till the start of the yr. So we want this circulate [of deals] to maintain up with demand, and we anticipate that to proceed,” she stated.
Issuance will “settle down” as the vacation season approaches, however demand will preserve tempo, in response to Johnston.
The secondary market has been a bit quieter within the final a number of days, with fewer bid-wanteds on the market as a consequence of little promoting strain proper now, she stated.
“Every little thing is doing wonderful; it is simply slowed a little bit bit. Something that is been on the market has accomplished nice in comparison with eval,” Johnston stated.
In comparison with the beginning of the yr, munis are in a stronger place, stated James Welch, municipal portfolio supervisor at Principal Asset Administration.
“Coverage uncertainty has receded, provide pressures are easing, and demand has broadened throughout each institutional and retail channels,” he stated. “The asset class now advantages from more healthy technicals, normalized valuations, and a renewed position as an income-rich, defensive allocation heading into 2026.”
Whereas dangers stay, “significantly the opportunity of stickier inflation delaying Fed easing … municipals now current one of the constructive setups in recent times,” Welch stated.
Earlier headwinds, comparable to worries over the elimination of the tax exemption, document issuance and delayed Fed cuts, have subsided, he stated.
Provide, although nonetheless elevated, is moderating, and with coverage threat “off the desk,” valuations have reset to extra enticing ranges, he stated.
Total, the market’s technical place has “meaningfully improved” and demand is robust, Welch stated.
Absolute yields stay elevated, and on a tax-equivalent foundation, munis supply “a number of the most engaging earnings alternatives throughout mounted earnings,” he stated, noting “these yields have drawn nontraditional patrons again into the market … including to the retail base already trying to find tax-advantaged earnings.”
Within the major market, Morgan Stanley priced for Oklahoma Metropolis Water Utilities Belief (Aaa/AAA//) $186.91 million of utility system income refunding and enchancment bonds, with 5s of seven/2028 at 2.48%, 5s of 2030 at 2.49%, 5s of 2035 at 2.86%, 5s of 2040 at 3.37%, 5s of 2045 at 3.96%, 5s of 2050 at 4.22% and 5s of 2055 at 4.31%, callable 7/1/2034.
Wells Fargo priced for Charlotte, North Carolina, (Aaa/AAA/AAA/) $177.4 million of GO refunding bonds, Collection 2025B, with 5s of seven/2026 at 2.61%, 5s of 2030 at 2.42%, 5s of 2035 at 2.74%, 5s of 2040 at 3.32% and 4s of 2045 at 4.09%, callable 7/1/2035.
Jefferies priced for the Village Neighborhood Improvement District No. 16, Florida, $127 million of nonrated particular evaluation income bonds, with 3.55s of 5/2030 at par, 4s of 2035 at 3.93%, 4.5s of 2040 at 4.40%, 4.875s of 2045 at par and 5.125s of 2056 at par, callable 5/1/2033.
Morgan Stanley priced for Oregon (Aa1/AA+/AA+/) $106.88 million of GOs, 2025 Collection Okay, with 5s of 11/2026 at 2.57%, 5s of 2030 at 2.46%, 5s of 2035 at 2.86%, 5s of 2040 at 3.39%, 5s of 2045 at 3.93% and 5s of 2050 at 4.15%, callable 11/1/2035.
Within the aggressive market, Suffolk County, New York, (/AA-/AA-/) bought $188.735 million of public enchancment serial bonds, Collection 2025A, to Jefferies, with 5s of 11/2026 at 2.50%, 5s of 2030 at 2.34%, 4s of 2035 at 2.71% and 4s of 2039 at 3.20%, callable 11/1/2033.
Henrico County, Virginia, (Aaa/AAA/AAA/AAA/) bought $125 million of water and sewer system income bonds, Collection 2025D, to BofA Securities, with 5s of 5/2029 at 2.37%, 5s of 2030 at 2.38%, 5s of 2035 at 2.75%, 4s of 2040 at 3.49%, 4s of 2044 at 4.02% and 4.25s of 2051 at 4.34%, callable 5/1/2035.
Fund flows
Buyers added $1.123 billion to municipal bond mutual funds within the week ended Wednesday, following $678.1 million of inflows the prior week, in response to LSEG Lipper information.
Excessive-yield funds noticed inflows of $179.2 million in comparison with inflows of $15.1 million the earlier week.
Tax-exempt municipal cash market funds noticed outflows of $153.9 million for the week ending Oct. 21, bringing whole belongings to $140.437 billion, in response to the Cash Fund Report, a weekly publication of EPFR.
The common seven-day easy yield for all tax-free and municipal money-market funds fell to 2.02%.
Taxable money-fund belongings noticed $43.573 billion added, bringing the full to $7.225 trillion.
The common seven-day easy yield was at 3.80%.
The SIFMA Swap Index was at 2.50% on Wednesday in comparison with the earlier week’s 2.31%.
AAA scales
MMD’s scale was lower two foundation factors six years and in: 2.53% (+2) in 2026 and a pair of.42% (+2) in 2027. The five-year was 2.36% (+2), the 10-year was 2.70% (unch) and the 30-year was 4.10% (unch) at 3 p.m.
The ICE AAA yield curve was lower as much as three foundation factors: 2.49% (+3) in 2026 and a pair of.41% (+3) in 2027. The five-year was at 2.38% (+1), the 10-year was at 2.74% (unch) and the 30-year was at 4.08% (unch) at 3 p.m.
The S&P International Market Intelligence municipal curve was lower on the entrance finish: The one-year was at 2.51% (+3) in 2025 and a pair of.43% (+3) in 2026. The five-year was at 2.36% (+2), the 10-year was at 2.71% (unch) and the 30-year yield was at 4.08% (unch) at 3 p.m.
Bloomberg BVAL was lower seven years and in: 2.48% (+2) in 2025 and a pair of.42% (+2) in 2026. The five-year at 2.34% (+1), the 10-year at 2.70% (unch) and the 30-year at 4.04% (unch) at 4 p.m.
Treasuries had been weaker.
The 2-year UST was yielding 3.487% (+4), the three-year was at 3.493% (+5), the five-year at 3.605% (+5), the 10-year at 4% (+5), the 20-year at 4.553% (+5) and the 30-year at 4.582% (+5) close to the shut.
