PrintMunis little changed as Fed week doesn't put a damper on supply
BY SourceMedia | MUNICIPAL | 04:05 PM ESTMunicipals were little changed as U.S. Treasury yields rose and equities ended down.
The two-year muni-UST ratio Monday was at 68%, the five-year at 65%, the 10-year at 66% and the 30-year at 88%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 69%, the five-year at 64%, the 10-year at 67% and the 30-year at 87% at a 4 p.m. read.
This week is the final Federal Open Market Committee meeting of the year, where the Federal Reserve is expected to cut rates by 25 basis points on Wednesday, said Jake Schurmeier of Harbor Capital Advisors.
However, the "real noise" will be around the number of dissents, which could be up to two committee members, he said.
"And then we think about what other committee members can signal potentially in the dots. You may see several other (non-voting) policymakers indicating that they wouldn't cut or ease," Schurmeier said.
December's rate cut could be the last until June 2026, he noted.
"We're going to get some fiscal stimulus in the first quarter. The (artificial intelligence) trades are going to continue. And so the economy is going to kind of right-size. We see a little more cyclical uplift in the labor market. And so the Fed's going to be on hold until June," Schurmeier said.
Issuers mostly avoided pricing deals in the previous weeks the Fed met this year, but with just two full trading weeks left in 2025, that's not the case this week, said Pat Luby, head of municipal strategy at CreditSights, and Wilson Lees, an analyst at the firm.
Issuers are set to borrow more than $10 billion this week, only 5% less than the one-year weekly average," they said.
The new-issue calendar is led by $2 billion of general revenue bonds from the University of California, followed by Chicago with $972.18 million of Chicago O'Hare International Airport revenue bonds and the New York City Housing Development Corp. with $957.76 million of sustainability development multi-family housing revenue bonds across three deals.
The muni market demonstrated "resilience" last week, outperforming USTs by seven to eight basis points across the curve despite the influx of $16 billion in new issues, the third-largest weekly figure of the year, said Birch Creek strategists.
"The stronger tone began to take hold after investors were taken by surprise by how well the primary calendar was getting digested, with several large deals being tightened amidst oversubscriptions," they said.
For instance, Massachusetts' $1.018 billion GO deal was tightened three to eight basis points up front and bumped two basis points out long on a day when $8 billion came to market, Birch Creek strategists said.
"It seemed investors used this heavier supply week to put cash to work that had been building up on the sidelines, especially after receiving $24 billion of Dec. 1 reinvestment cash and ahead of the year-end slowdown," they said.
Investors added $736.2 million to municipal bond mutual funds in the week ended Wednesday, following $682.2 million of inflows the prior week, according to LSEG Lipper data.
The inflows further added to demand and drove secondary trading volumes up, with an 18% increase in customer purchases on the week, said Birch Creek strategists, citing J.P. Morgan data.
In the competitive market Monday, the Blue Valley Unified School District No. 229, Kansas, (Aaa/AA+//) sold $101.25 million of general obligation school bonds, Series 2025-A, to Morgan Stanley
AAA scales
MMD's scale was unchanged: 2.48% in 2026 and 2.43% in 2027. The five-year was 2.43%, the 10-year was 2.77% and the 30-year was 4.21% at 3 p.m.
The ICE AAA yield curve was cut up to two basis points: 2.49% (unch) in 2026 and 2.45% (unch) in 2027. The five-year was at 2.40% (unch), the 10-year was at 2.79% (+2) and the 30-year was at 4.18% (+2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.48% in 2025 and 2.43% in 2026. The five-year was at 2.43%, the 10-year was at 2.77% and the 30-year yield was at 4.19% at 3 p.m.
Bloomberg BVAL was little changed 2.50% (unch) in 2025 and 2.45% (unch) in 2026. The five-year at 2.39% (unch), the 10-year at 2.73% (unch) and the 30-year at 4.11% (+1) at 4 p.m.
Treasuries were weaker.
The two-year UST was yielding 3.578% (+2), the three-year was at 3.611% (+3), the five-year at 3.749% (+4), the 10-year at 4.167% (+3), the 20-year at 4.778% (+3) and the 30-year at 4.809% (+2) near the close.
Primary to come
The Regents of the University of California (Aa2/AA/AA/) is set to price Tuesday $2 billion of general revenue bonds, Series 2025CD. Jefferies.
Chicago (/A+/A+/A+/) is set to price Tuesday $972.18 million of Chicago O'Hare International Airport revenue bonds, consisting of $466.88 million of Series 2025C and $505.3 million of 2025D. J.P. Morgan.
The Alabama Highway Authority (Aa2///) is set to price Thursday $730 million of special obligation revenue bonds. J.P. Morgan.
The Wisconsin Health and Educational Facilities Authority is set to price Thursday $627.885 million of Mercy Health Corp. refunding revenue bonds, consisting of $126.35 million of Series 2025A, $401.535 million of Series 2026A, $100 million of Series 2026B and $100 million of Series 2026C. Ziegler.
The New York City Housing Development Corp. (Aa2/AA+//) is set to price Tuesday $535.93 million of non-AMT sustainable development multi-family housing revenue bonds, consisting of $150 million of Series 2026A-1 and $385.93 million of Series 2026A-2. Jefferies.
The corporation is also set to price Tuesday $225 million of taxable sustainability development multi-family housing revenue bonds, Series 2025H-1. RBC Capital Markets.
The Virgin Islands Hotel Development Financing Corp. is set to price Wednesday $448.73 million of Frenchman's Reef Hotel Acquisition project hotel revenue bonds, consisting of $272.49 million of Senior Lien Series 2025A-1 senior lien bonds, $12 million of Taxable Senior Lien Series 2025A-2 and $164.24 million of Subordinate Lien Series 2025B. Piper Sandler
The Texas A&M University System Board of Regents of the (Aaa/AAA/AAA/) is set to price Tuesday $277.395 million of revenue financing system bonds, consisting of $222.25 million Series 2025A bonds and $55.145 million of taxable Series 2025B bonds. Wells Fargo
The Public Finance Authority is set to price Thursday $248.925 million of Tech Tower project multifamily housing revenue bonds, consisting of $202.45 million of Series 2025A, $3.085 million of Series 2025T and $43.39 million of Series 2025B. D.A. Davidson.
Ohio (Aaa/AAA/AAA/) is set to price Tuesday $244.475 million of GO refunding bonds, consisting of $200.185 million of Series 2025B common school bonds and $44.29 million of Series 2025B infrastructure improvement bonds. Jefferies.
The Maryland Stadium Authority (/AA/AA/) is set to price Tuesday $241.625 million of taxable Pimlico Improvements project revenue bonds. BofA Securities.
The Humble Independent School District is set to price Tuesday a $229.75 million deal, consisting of $184.095 million of PSF-insured Series 2026A unlimited tax school building and refunding bonds (Aaa/AAA//) and $45.655 million of non-PSF-insured Series 2026B unlimited tax refunding bonds (Aa1/AA//). RBC Capital Markets.
The MIDA Mountain Village Public Infrastructure District is set to price Thursday $125.205 million of tax allocation revenue bonds, consisting of $101.5 million of Series 2025-1 bonds and $23.705 million of Series 2025-2 convertible capital appreciation bonds. Stifel, Nicolaus & Co.
The Aurora Crossroads Metropolitan District No. 2, Colorado, is set to price Tuesday $120.658 million of GO limited tax bonds, consisting of $50.287 million of convertible capital appreciation refunding bonds, Series 2025A-1; $18.236 million of convertible capital appreciation refunding bonds, Series 2025A-2; and $51.135 million of bonds, Series 2025A-3. Piper Sandler
The Illinois Finance Authority (//BBB-/) is set to price Tuesday $105.57 million of The Moorings of Arlington Heights refunding revenue bonds, consisting of $66.09 million of Series 2025A, $16.28 million of Series 2025B-1 and $23.3 million of Series 2025B-2. Ziegler.
