Primary stays busy with NYC TFA, Cal Regents pricing

Municipals were little changed Wednesday as the primary market saw another busy day, led by an upsized $2.5 billion from the New York City Transitional Finance Authority and $1.3 billion from the Regents of the University of California. U.S. Treasuries were slightly firmer and equities were mixed toward the close.

The two-year muni-to-Treasury ratio Wednesday was at 65%, the three-year at 67%, the five-year at 68%, the 10-year at 67% and the 30-year at 84%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 65%, the three-year at 66%, the five-year at 67%, the 10-year at 67% and the 30-year at 83% at 3:30 p.m.

The Investment Company Institute reported Wednesday $748 million of inflows to municipal bond mutual funds for the week ending July 10 following $275 million of outflows the week prior.

Exchange-traded funds saw inflows of $1.251 billion, following outflows of $391 million the week prior.

On a relative basis, munis had a "rough start" to 2024, said Tracey Manzi, senior investment strategist at Raymond James.

Barring a "big move up" in UST yields, the worst for total returns has likely passed, said Cooper Howard, a fixed-income strategist at Charles Schwab (SCHW).

Most of 2024's poor performance happened during April and May, when munis saw losses of 1.2% and 0.3%, respectively, he noted.

"Returns in June were strong due to falling rates and helped partially reverse some of the poor performance," Howard said.

Supply factors largely drove market weakness during the first half, Manzi noted.

"We had a big volume of supply that got brought to the market in the first half of the year ? which weighed on the market," she said.

Both the total par amount and the number of deals rose in the first half, year-over-year, with the latter hitting a 10-year high, she said.

Issuance has remained robust over the past two weeks, with Wednesday being a particularly busy day.

In the primary market Wednesday, Ramirez priced and repriced for the New York City Transitional Finance Authority (Aa1/AAA/AAA/) an upsized $2.46 billion of future tax-secured subordinate bonds, with yields bumped up to six basis points from the preliminary pricing. The first tranche, $2.079 billion of tax-exempts, Fiscal 2025 Series A, Subseries A-1, saw 5s of 11/2025 at 2.94% (-6), 5s of 2029 at 3.01% (-1), 5s of 2034 at 3.13% (unch), 5s of 2039 at 3.33% (-6) and 5s of 2041 at 3.50% (-5), callable 11/1/2034.

The second tranche, $121.58 million of taxables, Fiscal 2025 Series A, Subseries A-1, saw all bonds price at par: 5s of 11/2025 and 4.682s of 2026.

The third tranche, $171.8 of tax-exempts, Fiscal 2025 Series B, Subseries B-1, saw 5s of 11/2024 at 3.10% (+3), 5s of 2030 at 3.06%, 5s of 2034 at 3.13% (unch) and 5s of 2038 at 3.30% (-1), callable 11/1/2034.

The fourth tranche, $89.375 million of taxables, Fiscal 2025 Series B, Subseries B-1, saw all bonds price at par: 5s of 11/2025 and 4.574s of 2029.

RBC Capital Markets preliminarily priced for the Regents of the University of California (Aa2/AA/AA/) $1.336 billion of general revenue bonds. The first tranche, $835.66 million of Series BW, saw 5s of 5/2025 at 2.89%, 5s of 2029 at 2.87%, 5s of 2034 at 2.92%, 5s of 2039 at 3.14%, 5s of 2044 at 3.50%, 5s of 2048 at 3.66% and 5s of 2054 at 3.78%, callable 5/15/2034.

The second tranche, $500.715 million of Series BX, saw 5s of 5/2026 at 2.92%, 5s of 2029 at 2.87% and 5s of 2031 at 2.90%, noncall.

BofA Securities priced for the San Francisco Public Utilities Commission $518.265 million of taxable wastewater revenue bonds. The first tranche, $431.15 million of green SSIP bonds, 2024 Series A (Aa2///), with 4.655s of 10/2027 at par, callable 9/1/2027.

The second tranche, $87.115 million of non-SSIP bonds, 2024 Series B (Aa2/AA//), with all bonds pricing at par: 4.655s of 10/20287, 4.581s of 2028, 4.886s of 2034 and 5.086 s of 2037, callable 10/1/2034.

Raymond James preliminarily priced for the Lamar Consolidated Independent School District, Texas, (Aaa/AAA//) $345.75 million of PSF-insured unlimited tax schoolhouse and refunding bonds, Series 2024, with 5s of 2025 at 3.08%, 5s of 2029 at 2.95%, 5s of 2034 at 3.08%, 5s of 2039 at 3.32%, 5s of 2044 at 3.68%, 5s of 2049 at 3.93%, 4s of 2054 at 4.29% and 5.25s of 2059 at 4.06%.

BofA Securities priced for the Dormitory Authority of the State of New York (Baa3/BBB-//) $143.43 million of Pace University revenue bonds, Series 2024A, with 5.25s of 5/2027 at 3.63%, 5.25s of 2029 at 3.68%, 5.25s of 2034 at 3.78%, 5.25s of 2039 at 3.94%, 5.25s of 5/2044 at 4.27%, 5.5s of 2049 at 4.32% and 5.5s of 2056 at 4.44%, callable 5/1/2034.

In the competitive market, Memphis, Tennessee, (Aa2/AA//) sold $136.56 million of general improvement bonds, Series 2024A, to BofA Securities, with 5s of 10/2025 at 2.99%, 5s of 4/2029 at 2.90%, 5s of 10/2029 at 2.90%, 5s of 4/2034 at 2.97%, 5s of 4/2039 at 3.25% and 5s of 4/2044 at 3.63%, callable 4/1/2033.

Irving, Texas, (Aaa/AAA/) sold $122.04 million of GOs, Series 2024, to BofA Securities, with 5s of 9/2025 at 3.05%, 5s of 2029 at 2.96%, 5s of 2034 at 3.00%, 5s of 2039 at 3.27% and 4s of 2044 at 4.13%, callable 9/15/2033.

Issuance will slow down in the second half, offering a reprieve from the supply perspective, according to Manzi.

Additionally, should the Federal Reserve make the expected rate cuts in the second half of the year, it will be a "boon" for the muni market, she said.

Due to this, Manzi believes the second half will see better muni market performance, but the election remains a wildcard.

The muni market continues to be plagued by low relative yields, Howard said.

While absolute yields are "attractive," relative yields continue to hover near their two-year lows due to "supply and demand issues, not the market betting on higher taxes," he said.

Relative yields could be pushed higher by expectations for lower taxes, increased issuance, and concerns over credit would lead yields to move higher, according to Howard.

If relative yields move higher, munis will likely underperform USTs.

AAA scales
Refinitiv MMD's scale was unchanged: The one-year was at 2.90% and 2.88% in two years. The five-year was at 2.77%, the 10-year at 2.78% and the 30-year at 3.66% at 3 p.m.

The ICE AAA yield curve was little changed: 2.93% (-1) in 2025 and 2.89% (-1) in 2026. The five-year was at 2.75% (-1), the 10-year was at 2.78% (unch) and the 30-year was at 3.64% (unch) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.98% in 2025 and 2.94% in 2026. The five-year was at 2.79%, the 10-year was at 2.79% and the 30-year yield was at 3.64% at 3 p.m.

Bloomberg BVAL was unchanged: 2.95% in 2025 and 2.89% in 2026. The five-year at 2.80%, the 10-year at 2.78% and the 30-year at 3.67% at 3:30 p.m.

Treasuries were a touch firmer.

The two-year UST was yielding 4.431% (flat), the three-year was at 4.199% (-1), the five-year at 4.073% (-1), the 10-year at 4.151% (-2), the 20-year at 4.467% (-1) and the 30-year at 4.367% (-1) at 3:30 p.m.

Primary to come
The San Francisco Public Utilities Commission (Aa2/AA//) is set to price Thursday $634.115 million of wastewater revenue bonds, consisting of $547.835 million of green SSIP bonds, 2024 Series C and $86.28 million of non-SSIP bonds 2024 Series D. Morgan Stanley (MS).

The Maryland Economic Development Corp. (/AA//) is set to price Thursday $148.435 million of Assured Guaranty-insured University of Maryland College Park-Leonardtown Project student housing revenue bonds, Series 2024, serials 2028-2034, terms 2044, 2054, 2059, 2064. RBC Capital Markets.

The Ascension Parish-Wide School District, Louisiana, (/AA///) is set to price Thursday $110 million of GO school bonds, Series 2024, serials 2025-2044. D.A. Davidson.

Carmel, Indiana, is set to price Thursday $107.765 million of waterworks refunding revenue bonds, consisting of $56.82 million of Series SERB, serials 2025-2049, and $50.945 million of Series SERC, serials 2025-2053. Stifel.

Competitive
Santa Clara County, California, (/AAA/AAA/) is set to sell taxable Election of 2016 GO, 2024 Series C, at 11 a.m. eastern Thursday.