Munis strike better tone while large new-issue slate takes focus

Municipals improved Tuesday as U.S. Treasury yields fell and equities ended mixed. Triple-A muni yields were bumped one to six basis points, depending on the curve, while USTs saw small gains across the curve with the best performance out long.

The secondary took a backseat to the primary market Tuesday, as several large new-issues priced with some deals, including the $1 billion high-yield United Airlines Terminal project in Houston, seeing solid demand.

While the calendar is "lighter than the weeks leading up to the election, this represents a reasonably decent week of supply," said Chris Brigati, senior vice president and director of strategic planning and fixed income research at SWBC.

The pent-up demand "should solidly absorb this issuance keeping ratios tight and opportunities to grab paper somewhat constrained," he said.

Munis continue to outperform, and ratios, especially in shorter maturities, have fallen into "uniformly rich levels," said Matt Fabian, a partner at Municipal Market Analytics, Inc.

The two-year municipal to UST ratio Tuesday was at 61%, the five-year at 63%, the 10-year at 67% and the 30-year at 82%, according to Refinitiv Municipal Market Data's 3 p.m. EST read. ICE Data Services had the two-year at 62%, the five-year at 62%, the 10-year at 66% and the 30-year at 81% at 4 p.m.

While ratios are rich, yields are still compelling and smaller transactions are driving "stronger buying" as retail investors show "enthusiasm for better income," Fabian noted.

And with total trade counts above 300,000 once more last week, most of the retail demand is being channeled through separately managed accounts, he said.

Mutual funds and exchange-traded funds saw "modest inflows" last week, while money market funds "lost cash that likely had only planned to stay a few nights, pending a longer-term accommodation elsewhere," Fabian said.

It's unclear whether mutual funds can sustain "positive momentum" through the end of the year, but excluding ETFs, they are on track to see $30 billion of inflows this year, he said. Of the past 15 years, only four years have been better.

How much more supply comes to close out the year will also play a role in performance. From this same week last year through yearend 2023, $45 billion of supply came to market, Fabian said.

Bond Buyer 30-day visible supply sits at $12.36 billion.

"This year, with the tax-exemption clearly threatened, primary calendars should (although, of course, might not) be larger, putting a $500 billion full-year supply total in range, with $451 billion already in the books through 46 weeks," he said.

For that to happen, Fabian said "yields won't be able to rally much, and, indeed, incremental price declines/yield hikes may well be needed, especially if USTs continue to be hit on inflation/credit fears."

In the primary market Tuesday, BofA Securities priced and repriced for Houston $1.1 billion of United Airlines Terminal Improvement Projects airport system special facilities AMT revenue bonds, Series 2024B, (Ba3//BB-/), with yields bumped five to 15 basis points: 5.25s of 7/2033 at 4.48% (-5), 5.25s of 2034 at 4.53% (-5) and 5.5s of 2039 at 4.66% (-15), callable 7/15/2034.

Goldman Sachs (GS) priced for the California Community Choice Financing Authority (A1///) $782.17 million of green clean energy project revenue bonds, Series 2024G, with 5s of 11/2055 with a mandatory tender date of 8/1/2032 and 4.15%, callable 5/1/2032.

Goldman Sachs (GS) held a one-day retail order period for $606.015 million of transportation infrastructure purposes special tax obligation bonds from Connecticut (Aa3/AA/AA-/AAA/). The first tranche, $231.22 million of Series 2024A-1 bonds, saw 5s of 7/2025 at 3.15%, 5s of 2029 at 2.84% and 5s of 2031 at 2.95%, noncall.

The second tranche, $374.795 million of refunding Series 2024B bonds, saw 5s of 7/2025 at 3.15%, 5s of 2029 at 2.84% and 5s of 2031 at 2.95%, noncall.

J.P. Morgan priced for Austin (Aa3/AA-/AA-/) $240.94 million of electric utility system revenue refunding bonds with 5s of 11/2028 at 2.73%, 5s of 2029 at 2.81%, 5s of 2034 at 3.12%, 5s of 2039 at 3.40%, 5s of 2044 at 3.78%, 5s of 2050 at 4.03% and 5s of 2054 at 4.09%, callable 11/15/2034.

RBC Capital Markets preliminarily priced for the Wisconsin Housing and Economic Development Authority (Aa2/AA+//) $215 million of home ownership non-AMT social revenue bonds, Series 2024C, with all bonds at par ? 3.25s of 9/2025, 3.35s of 3/2029, 3.4s of 9/2029, 3.875s of 3/2034, 3.9s of 9/2034, 4.125s of 9/2039, 4.4s of 9/2044 and 4.625s of 3/2051 ? except for 6s of 2/3055 at 3.74%, callable 9/1/2033.

In the competitive market, the Delaware Transportation Authority (Aaa/AA+//) sold $153.48 million of transportation system senior revenue bonds to BofA Securities, with 5s of 7/2026 at 2.68%, 5s of 2029 at 2.61%, 5s of 2034 at 2.98%, 5s of 2039 at 3.26% and 3s of 2044 at 4.00%, callable 7/1/2034.

Negotiated calendar:
The Maricopa Industrial Development Authority (Ba1//BBB-/) is set to price Thursday $520 million of Grand Canyon University Project taxable education revenue bonds, Series 2024. Goldman Sachs (GS).

The Omaha Airport Authority (A1/AA-//) is set to price Wednesday $319.45 million of airport facilities AMT revenue bonds, Series 2024, serials 2025-2044, terms 2049, 2054. BofA Securities.

The Pennsylvania Housing Finance Agency (Aa1/AA+//) is set to price Wednesday $248.56 million of single-family mortgage non-AMT social revenue bonds, Series 2024-147A, serials 2025-2036, terms 2039, 2044, 2049, 2053, 2054. Jefferies.

The Tennessee Housing Development Agency is set to price Wednesday $224.275 million of residential finance program non-AMT social bonds, consisting of $99.265 million of Series 2024-3B and $125.01 million of Series 2024-3C. Raymond James.

The North Dakota Housing Finance Agency (Aa1///) is set to price Wednesday $195 million of Home Mortgage Finance Program housing finance program non-AMT social bonds, Series 2024D, serials 2026-2036, terms 2039, 2044, 2049, 2052, 2055. RBC Capital Markets.

The Cabarrus County Development Corp., North Carolina, (Aa1/AA+/AA+/) is set to price Wednesday $135.655 million of limited obligation bonds, Series 2024B, serials 2025-2044. BofA Securities.

Garland, Texas, (A1//AA-/) is set to price Wednesday $109.66 million of electric utility system revenue refunding bonds, New Series 2024. Wells Fargo (WFC).

Competitive:
The Santa Barbara Finance Authority, California, (Aa2/AA//) is set to sell $124.222 million of public safety and park project lease revenue bonds at 11:15 am Wednesday.

Dallas (/AA-/AA/) is set to price $319.905 million of GO refunding and improvement bonds at 11:15 a.m. Thursday and $248.78 million of waterworks and sewer system revenue refunding bonds at noon Thursday.