PrintMunis little changed, inflows top $1B
BY SourceMedia | MUNICIPAL | 01/08/26 04:01 PM ESTMunis were little changed Thursday in the secondary market as two large prepaid gas deals priced in the primary market. U.S. Treasuries cheapened slightly and equities ended mixed.
Munis are off to a "hot start" this year, said Jeremy Holtz, a portfolio manager at Income Research + Management.
"The market is very firm (and) off to a good start, which is typical for January, but we've got a lot of supply coming in," he said.
Many investors have been on the sidelines over the past few weeks, as issuance was virtually nonexistent in the final two weeks of December, according to Holtz.
"Then you come back in the beginning of January and have a lot of cash from maturity and coupons," so some investors, those that may be a little less patient than others, are putting cash to work. However, Holtz thinks patience may pay off.
Issuance is light this week at $6.382 billion, according to LSEG.
The street pegs January issuance between $35 billion and $40 billion, meaning after this week, the market has to "get through" at least $30 billion for the remainder of the month, which includes the holiday-shortened week of Martin Luther King Jr. Day, Holtz said.
There are some large deals already slated for the next few weeks.
For the week of Jan. 12, sizable deals include $1.276 billion of airport improvement revenue bonds from the Metropolitan Nashville Airport Authority and $760.375 million of unlimited tax school building bonds from the Dallas Independent School District, according to CreditSights.
For the week of Jan. 19, large deals include $900 million of water and sewer system second resolution revenue bonds from the New York City Municipal Water Finance Authority and $667.208 million of variable rate junior lien refunding bonds from CPS Energy, the firm noted.
Investors will be open to a lot of supply this January, Holtz said.
Issuance will start to weigh on investors further down the line, when there is week after week of issuance. That's when the market tends to see "indigestion," he noted.
The two-year muni-UST ratio Thursday was at 65%, the five-year at 61%, the 10-year at 64% 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 64%, the five-year at 61%, the 10-year at 64% and the 30-year at 86% at a 4 p.m. read.
While muni-UST ratios have fallen since the start of January, they are very normal and likely attractive compared to 2024. There were even periods of 2022 and 2023 where "very low ratios were sustained for a long period of time, which we attributed to a really big supply/demand balance (that) just wasn't getting on supply," he said.
"That corrected a bit last year with all that supply, but now you're starting to see all of that demand overwhelm supply once again. That's impressive given the fact that we've got over $500 billion (of supply) last year," Holtz said.
Currently, spreads are on the richer side for the most part, though there are pockets of opportunities, such as within gas rebates and housing, according to Holtz.
"Not everything is priced to perfection, but with each passing day in January, it does seem like the market is getting (a) richer compensation scheme," he said.
New-issue market
In the primary market Thursday, J.P. Morgan priced for the Black Belt Energy Gas District (/AA-//) $793.96 million of gas project revenue bonds, 2025 Series F, with 5s of 12/2027 at 3.18%, 5s of 2031 at 3.63% and 5s of 2035 at 4.15%, callable 9/1/2035.
Goldman Sachs
Wells Fargo
Wells Fargo
Fund flows
Investors added $1.454 billion to municipal bond mutual funds in the week ended Wednesday, following $751.8 million of inflows the prior week, according to LSEG Lipper data.
High-yield funds saw inflows of $290.7 million compared to outflows of $270.6 million the previous week.
Tax-exempt municipal money market funds saw inflows of $3.894 billion for the week ending Jan. 5, bringing total assets to $153.848 billion, according to the Money Fund Report, a weekly publication of EPFR.
The average seven-day simple yield for all tax-free and municipal money-market funds was 2.08%.
Taxable money-fund assets saw $72.298 billion added, bringing the total to $7.607 trillion.
The average seven-day simple yield was 3.44%.
The SIFMA Swap Index was at 1.37% on Wednesday compared to the previous week's 2.36%.
AAA scales
MMD's scale was bumped up to two basis points: 2.31% (-1) in 2027 and 2.27% (-1) in 2028. The five-year was 2.27% (-1), the 10-year was 2.67% (unch) and the 30-year was 4.21% (unch) at 3 p.m.
The ICE AAA yield curve was bumped up to two basis points: 2.30% (-2) in 2027 and 2.23% (-2) in 2028. The five-year was at 2.25% (-1), the 10-year was at 2.66% (-1) and the 30-year was at 4.14% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.33% in 2027 and 2.29% in 2028. The five-year was at 2.30%, the 10-year was at 2.68% and the 30-year yield was at 4.17% at 3 p.m.
Bloomberg BVAL was little changed: 2.35% (unch) in 2027 and 2.30% (unch) in 2028. The five-year at 2.25% (unch), the 10-year at 2.59% (unch) and the 30-year at 4.09% (+1) at 4 p.m.
Treasuries were slightly weaker.
The two-year UST was yielding 3.489% (+2), the three-year was at 3.555% (+3), the five-year at 3.737% (+3), the 10-year at 4.182% (+3), the 20-year at 4.797% (+3) and the 30-year at 4.856% (+3) near the close.
