Bond markets firm on Maduro capture

Muni yields fell Monday, as U.S. Treasuries saw small gains and equities ended up in aftermath of the capture of Venezuelan President Nicol?s Maduro.

Market reactions to the geopolitical actions in Venezuela remain "largely contained," said Mona Mahajan, head of investment strategy at Edward Jones.

"Stock markets in the U.S. are largely higher, with the Dow Jones leading the S&P 500 and NASDAQ," she said. "There has been some flight to safe-haven assets, with U.S. Treasury bonds, U.S. dollar, and gold all modestly higher on Monday.

Improved risk sentiment after the capture of Maduro has helped pull investors into all markets, and munis are a "beneficiary" of that shift, said James Pruskowski, an investor and market strategist.

Additionally, munis are firmer as the macro and the technicals finally aligned. "Stable rates and strong seasonal demand are tightening conditions, and price action is confirming it," he said.

Last week, the holiday-shortened week kept muni trading "quiet," although "modest strength" emerged in three- to seven-year maturities, with yields falling as much as four basis points, said Chris Brigati, managing director and CIO at SWBC.

Last week,10-year muni-UST held near 67%-68%, while front-end ratios hovered around 70%, he said.

The two-year muni-UST ratio Monday was at 68%, the five-year at 63%, the 10-year at 66% and the 30-year at 87%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 67%, the five-year at 62%, the 10-year at 65% and the 30-year at 86% at a 4 p.m. read.

"Strong inflows into muni funds and [exchange-traded funds] should support demand, along with January reinvestment flows expected to exceed $50 billion for the month," Brigati said.

With $6.382 billion in new issuance expected this week, "secondary markets will likely remain tight as accounts seek paper following a less active primary market during the prior two holiday weeks," he said.

Even with two holiday-shortened weeks that brought lackluster supply, December issuance was at $40.448 billion, up 19.6% year-over-year. This was the highest monthly issuance total for December since 2021, per LSEG data.

This contributed to the 2025 record supply of nearly $580 billion. Volume was up 12.9% year-over-year, according to LSEG data.

Investment-grade munis posted small gains in December, with a 0.09% return, bringing 2025 returns to 4.25%. High-yield munis saw losses of 0.24% in December but gains of 2.46% for 2025.

Taxable munis also posted negative returns of 0.35% in December but positive returns of 7.89% last year.

USTs and corporates saw losses in December of 0.33% and 0.20%, respectively, but were in the black for 2025 with returns of 6.32% and 7.77%, respectively.

Front-end MMD yields fell four to five basis points, while yields rose up to five basis points out long in December.

In 2025, yields for 2026-2040 maturities fell while maturities from 2041-2055 rose, leading to the yield curve steepening by 68.8 basis points.

Muni yields were bumped 40-53 basis points in the 2026-2035 range. The 2036-2037 maturities saw yields bump by 25-32 basis points, while the 2038-2040 maturities saw bumps of 6-18 basis points, said Jason Wong, vice president of AmeriVet Securities.

The 2041-2043 range saw cuts of one to20 basis points while the 2044-2055 maturities saw cuts of 26-35 basis points, he said.

AmeriVet Securities continues to see a "positive outlook for munis as yields continue to look attractive for investors as they will continue to take advantage of the higher yields before further rate cuts," Wong said.

Higher yields, along with "favorable" supply and demand, should further drive investment demand, eventually driving yields lower, he said.

AAA scales
MMD's scale was bumped two to six basis points: 2.38% (-5) in 2027 and 2.34% (-5) in 2028. The five-year was 2.35% (-5), the 10-year was 2.73% (-5) and the 30-year was 4.23% (-2) at 3 p.m.

The ICE AAA yield curve was bumped up to five basis points: 2.38% (-5) in 2027 and 2.34% (-4) in 2028. The five-year was at 2.34% (-2), the 10-year was at 2.73% (-2) and the 30-year was at 4.17% (-1) at 4 p.m.

The S&P Global Market Intelligence municipal curve was bumped: The one-year was at 2.39% (-5) in 2027 and 2.34% (-5) in 2028. The five-year was at 2.35% (-5), the 10-year was at 2.71% (-5) and the 30-year yield was at 4.19% (-3) at 3 p.m.

Bloomberg BVAL was bumped two to four basis points: 2.43% (-4) in 2027 and 2.38% (-4) in 2028. The five-year at 2.32% (-4), the 10-year at 2.67% (-4) and the 30-year at 4.12% (-2) at 4 p.m.

Treasuries were firmer.

The two-year UST was yielding 3.4754% (-2), the three-year was at 3.521% (-3), the five-year at 3.704% (-4), the 10-year at 4.16% (-3), the 20-year at 4.79% (-3) and the 30-year at 4.849% (-2) near the close.

Primary to come
The Board of Regents of the University of Texas System is set to price $1 billion of revenue financing system bonds, Series 2026A. Goldman Sachs (GS).

The New York State Thruway Authority (A1/A//) is set to price Thursday $847.835 million of general revenue junior indebtedness refunding obligations, Series 2026A. Goldman Sachs (GS).

The Black Belt Energy Gas District (/AA-//) is set to price $814.6 million of gas project revenue bonds, 2025 Series F. J.P. Morgan.

The Tennessee Energy Acquisition Corp. (Aa3///) is set to price $767.545 million of gas project revenue bonds, Series 2026A. Goldman Sachs (GS).

The Conroe Independent School District (Aaa/AAA//) is set to price Wednesday $442.915 million of PSF-insured unlimited tax school building bonds, Series 2026. FHN Financial.

The Oregon Department of Transportation (Aa2/AA+/AA+/) is set to price Thursday $223.695 million of highway user tax revenue subordinate lien refunding bonds, Series 2026A. Wells Fargo (WFC).

Illinois Housing Development Authority (Aaa///) is set to price Tuesday $200 million of social revenue bonds, consisting of $155 million of non-AMT bonds, 2026 Series A, and $45 million of taxable bonds, 2026 Series B. Morgan Stanley (MS).

The Florida Housing Finance Corp. (Aaa///) is set to price Tuesday $200 million of homeowner mortgage revenue bonds, consisting of $140 million of non-AMT 2026 Series 1 bonds and $60 million of taxable 2026 Series 2 bonds. Raymond James.

The Omaha Public Power District (A1/A//) is set to price Thursday $168.005 million of separate electric system revenue refunding bonds (Nebraska City 2), 2026 Series A. Wells Fargo (WFC).

The Connecticut Health and Educational Facilities Authority (Aaa/AAA//) is set to price Tuesday $168 million of Yale University issue revenue bonds, Series V. J.P. Morgan.

The South Dakota Housing Development Authority (Aaa/AAA//) is set to price Wednesday $145 million of homeownership mortgage refunding bonds, consisting of $120 million of non-AMT Series A bonds and $25 million of taxable Series B bonds. Wells Fargo (WFC).

Broomfield, Colorado, (Aa2///) is set to price Wednesday $112.41 million of sewer activity enterprise revenue and refunding bonds. Stifel, Nicolaus & Co.

Competitive
North Attleborough, Massachusetts, (/AA+//) is set to sell $74.595 million of general obligation municipal purpose loan bonds of 2026, at 11 a.m., Eastern Wednesday.