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Municipals are firmer in spots Thursday as U.S. Treasuries noticed beneficial properties and equities finish down.
The 2-year muni-UST ratio Thursday was at 69%, the five-year at 65%, the 10-year at 67% and the 30-year at 88%, based on Municipal Market Knowledge’s 3 p.m. EDT learn. ICE Knowledge Providers had the two-year at 68%, the five-year at 64%, the 10-year at 66% and the 30-year at 87% at a 4 p.m. learn.
Whereas this was a blockbuster week for issuance, provide might begin to decelerate, as this yr was a “entrance run” on questions associated to the One Large Lovely Invoice Act, mentioned Derek Plaski, affiliate portfolio supervisor and senior funding analyst at Federated Hermes.
Nevertheless, it is potential December may even see heavier-than-usual issuance, he mentioned.
Gross provide over the subsequent two months shall be $88 billion and issuance will finish the yr at $578 billion, or up 16% year-over-year, mentioned Peter Block, managing director of credit score technique at Ramirez.
Fund flows, which have been sturdy, are supportive of the market, Plaski mentioned.
Treasury charges drive the muni market and flows coincide with that in a method, he mentioned.
“Flows are robust now, however I feel there’s some fear, if we have been to see Treasury charges again up meaningfully, would that change the momentum of flows,” Plaski mentioned.
Munis profit from a “highly effective” seasonal tailwind into yearend, mentioned BlackRock’s Patrick Haskell, head of the municipal bonds group; James Schwartz, head of municipal credit score analysis; and Sean Carney, CIO of municipal bond funds.
Traditionally, October has been a difficult month as a consequence of sturdy provide, averaging unfavorable 0.46% return over the previous decade; nonetheless, this normally units up sturdy rebounds in November and December as provide ranges abate, they mentioned.
Over the past 10 years, November has been the most effective month for munis, averaging beneficial properties of 1.26%, whereas December ranks fourth at 0.64%, BlackRock strategists mentioned.
“Collectively, these results have made the fourth quarter the top-performing interval of the yr, averaging a complete return of 1.44%,” they mentioned.
BlackRock strategists anticipate the same dynamic in 2025, with “October’s potential weak spot offering alternatives so as to add publicity forward of anticipated power later within the quarter,” BlackRock strategists mentioned.
In the meantime, Treasury charges might function a possible headwind for the remainder of the yr, Plaski mentioned.
With the “blackout” on information, there’s plenty of uncertainty about the place the Treasury charges will find yourself and the way the Treasury market will reply to new information, based on Plaski.
One other potential problem is the extended length of the federal government shutdown. The longer it goes on, the extra pronounced impact it should have, which might finally spill over into munis in a significant method, he mentioned.
In 2026, the macro backdrop shall be “dominated by a typically robust U.S. economic system with weakening labor markets, sticky inflation, AI-obsession [and] fraught politics,” Block mentioned.
The Treasury curve will proceed to steepen: Three to 4 Federal Reserve price cuts subsequent yr, together with the tip of quantitative tightening and heavy T-bill issuance, “anchors front-end charges with barely decrease rangebound charges by ~10yrs,” he mentioned.
Within the major market Thursday, BofA Securities priced for San Francisco (Aa2/AA/AA+/) $271.275 million of a number of capital enchancment tasks refunding certificates of participation, Collection 2025-R1, with 5s of 4/2026 at 2.46%, 5s of 2030 at 2.29%, 5s of 2035 at 2.61%, 5s of 2040 at 3.35% and 5s of 2041 at 3.49%, callable 4/1/2035.
Siebert Williams Shank priced for Austin (A1/A+//AA-/) $229.15 million of AMT airport system income refunding bonds, with 5s of 11/2026 at 3.11%, 5s of 2030 at 3.24%, 5s of 2035 at 3.59%, 5s of 2040 at 4.03% and 5s of 2044 at 4.42%, callable 11/15/2035.
Within the aggressive market, Montgomery County, Maryland, (Aaa/AAA/AAA/) bought $280 million of GO consolidated public enchancment bonds of 2025, Collection A, to J.P. Morgan, with 5s of 10/2026 at 2.57%, 5s of 2030 at 2.49%, 5s of 2035 at 2.87%, 4s of 2040 at 3.75%, and 4.125s of 2045 at 4.18%, callable 10/1/2033.
Fund flows
Buyers added $1.266 billion to municipal bond mutual funds within the week ended Wednesday, following $744.3 million of inflows the prior week, based on LSEG Lipper information.
Excessive-yield funds noticed small inflows of $277 million in comparison with inflows of $0.3 million the earlier week.
Tax-exempt municipal cash market funds noticed inflows of $2.494 billion for the week ending Nov. 4, bringing whole belongings to $140.892 billion, based on the Cash Fund Report, a weekly publication of EPFR.
The typical seven-day easy yield for all tax-free and municipal money-market funds rose to 2.70%.
Taxable money-fund belongings noticed $117.5 billion added, bringing the overall to $7.36 trillion.
The typical seven-day easy yield was at 3.73%.
The SIFMA Swap Index was at 2.68% on Wednesday in comparison with the earlier week’s 3.22%.
AAA scales
MMD’s scale was bumped as much as 4 foundation factors: 2.54% (-2) in 2026 and a pair of.46% (unch) in 2027. The five-year was 2.41% (-2), the 10-year was 2.75% (-3) and the 30-year was 4.14% (-4) at 3 p.m.
The ICE AAA yield curve was combined: 2.56% (+1) in 2026 and a pair of.49% (+2) in 2027. The five-year was at 2.43% (-1), the 10-year was at 2.76% (-2) and the 30-year was at 4.11% (-1) at 4 p.m.
The S&P World Market Intelligence municipal curve was bumped one to a few foundation factors: The one-year was at 2.54% (-1) in 2025 and a pair of.44% (-2) in 2026. The five-year was at 2.39% (-1), the 10-year was at 2.75% (-1) and the 30-year yield was at 4.12% (-3) at 3 p.m.
Bloomberg BVAL was bumped one to a few foundation factors: 2.52% (-1) in 2025 and a pair of.47% (-1) in 2026. The five-year at 2.38% (-2), the 10-year at 2.71% (-3) and the 30-year at 4.06% (-3) at 4 p.m.
Treasuries noticed beneficial properties.
The 2-year UST was yielding 3.563% (-7), the three-year was at 3.574% (-7), the five-year at 3.686% (-8), the 10-year at 4.09% (-7), the 20-year at 4.658% (-6) and the 30-year at 4.684% (-5) close to the shut.
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