Munis steady to start February, USTs see losses

Munis were steady to start the month, as U.S. Treasuries saw losses and equities ended up.

The two-year muni-UST ratio Monday was at 61%, the five-year at 58% the 10-year at 62% and the 30-year at 87%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 61%, the five-year at 58%, the 10-year at 62% and the 30-year at 87%, according to ICE Data Services.

The muni market "got off to a relatively sleepy, but strong, start to the new year," said Bob Lind, co-founder of Lind Capital Partners.

Both the investment-grade and high-yield indices finished January in positive territory, with the HY munis marginally outperforming their IG counterparts, returning 0.98% versus 0.94%, respectively, he said.

The AAA muni curve "bull steepened" in January, as five- and 10-year munis were lower by 14 basis points and 10 basis points, respectively, while 30-year rates rose three basis points, Lind said.

Issuance was $34.308 billion in January, down 7.2% year-over-year from $36.982 billion in 2025, according to LSEG.

However, the total was the third-highest monthly figure for January and topped the month's 10-year average of $29.699 billion, the data shows.

The market is well-positioned for February, after January's near-record tax-exempt supply. February is set to have $40 billion of same-month reinvestment capital, said J.P. Morgan strategists led by Peter DeGroot.

The firm expects to see "better opportunities to invest at cheaper levels" throughout the first half of the year, with a more challenging liquidity backdrop and rate volatility.

To close out the month, issuance was light last week, but the market "persisted" amid strong fund flows and "a mostly rallying Treasury curve," Birch Creek strategists wrote. The long end of the AAA MMD curve was unchanged as the rest of the curve's yields fell by three to four basis points.

An imbalance is emerging between supply and demand, according to Birch Creek's strategists, citing J.P. Morgan data.

"Customer BWICs fell 5% relative to the previous five-week average, which was already dampened due to yearend trade volumes, while customer secondary purchases jumped by 26%," Birch Creek wrote.

Accounts are flush with cash as 17 of the last 18 weeks have seen inflows, leaving holders disincentivized to sell anything; investment-grade buyers, meanwhile, had few options in the primary market and started to chase opportunities in the secondary market, they said.

While a "continued surge in fund flows can keep the market afloat, 2- to 10-year MMD/UST ratios in the 57%-60% range leave little to be desired," Birch Creek strategists said.

Managers may want to "pare down some risk" heading into the "seasonally weak environment" in March and April, they said.

The high-yield market was uneventful last week, Birch Creek strategists wrote.

"Holders seemingly were looking to take advantage of the positive tone and limited issuance [year-to-date]," Birch Creek strategists wrote. But "buyers were content to hang on to cash and wait for more attractive entry points as customer purchases fell by 25%."

"As cash buffers swell and sellers remain strategic, we continue to believe it's only a matter of time before risk-taking ramps up and more speculative credits get brought into the market," Birch Creek strategists wrote.

AAA scales
MMD's scale was little changed: 2.18% (unch, no Feb. roll) in 2027 and 2.18% (unch, no Feb. roll) in 2028. The five-year was 2.24% (unch, no Feb. roll), the 10-year was 2.64% (unch, +1bp Feb. roll) and the 30-year was 4.29% (unch) at 3 p.m.

The ICE AAA yield curve was little changed: 2.18% (unch) in 2027 and 2.17% (unch) in 2028. The five-year was at 2.21% (unch), the 10-year was at 2.66% (unch) and the 30-year was at 4.24% (-1) at 4 p.m.

The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.17% (unch) in 2027 and 2.17% (unch) in 2028. The five-year was at 2.25% (-1), the 10-year was at 2.64% (-1) and the 30-year yield was at 4.24% (unch) at 3 p.m.

Bloomberg BVAL was unchanged: 2.23% in 2027 and 2.20% in 2028. The five-year at 2.22%, the 10-year at 2.60% and the 30-year at 4.16% at 4 p.m.

USTs cheapened.

The two-year UST was yielding 3.566% (+4), the three-year was at 3.542% (+5), the five-year at 3.834% (+5), the 10-year at 4.276% (+4), the 20-year at 4.858% (+3) and the 30-year at 4.908% (+3) near the close.

Primary to come
Build NYC Resource Corp. is set to price Wednesday $635.27 million of nonrated revenue bonds (RiverSpring Health Senior Living, Inc. Project), consisting of $312.165 million of Series 2026A, $21.5 million of Series 2026B-1, $43.5 million of Series 2026B-2, $86.5 million of Series 2026B-3, $160.5 million of Series 2026B-4 and $11.105 million of Series 2026C. Ziegler.

The Chicago Transit Authority (/A+//AA-) is set to price Thursday a $575 million deal, consisting of $525 million of Series 2026A sales tax receipts revenue project and refunding bonds (/A+//AA-/) and $50 million of Series 2026B sales tax receipts revenue refunding bonds (/AA//AA/). Wells Fargo (WFC).

The San Diego County Regional Transportation Commission (/AAA/AAA/) is set to price Tuesday $343.275 million of sales tax refunding revenue bonds (limited tax bonds), 2026 Series A. Wells Fargo (WFC).

The Cherry Creek School District No. 5 (Aa1/AA//) is set to price Tuesday $316.665 million of GOs. Stifel.

The Port Authority of New York and New Jersey (Aa3/AA-/AA-/) is set to price Tuesday $300 million of non-AMT consolidated refunding bonds, 251st Series. Siebert Williams Shank.

The Tarrant County Cultural Education Facilities Finance Corp. (Aa2/AA-//) is set to price Tuesday $295.01 million of hospital revenue bonds (Baylor Scott & White Health Project), consisting of $149.115 million of Series 2026F and $145.895 million of Series 2026G. J.P. Morgan.

The Equitable School Revolving Fund (/A+//) is set to price Wednesday $275 million of social senior national charter school revolving loan fund revenue bonds, Series 2026 A. Siebert Williams Shank.

Th Dallas Independent School District, Texas, (Aaa///) is set to price Wednesday $273.985 million of PSF-insured multi-modal unlimited tax school building bonds, Series 2026B. Stifel.

The Olentangy Local School District, Ohio, (Aa1/AAA//) is set to price Tuesday $263.36 million of various purpose refunding bonds. RBC Capital Markets.

Cartersville, Georgia, (Aa3/AA-//) is set to price Thursday $240.955 million of water and sewer revenue bonds. Raymond James.

The Nebraska Investment Finance Authority (/AAA//) is set to price Wednesday $203.1 million of single-family housing revenue bonds. J.P. Morgan.

The Maryland Health and Higher Educational Facilities Authority (A2/A//) is set to price Thursday $189.395 million of MedStar Health issue revenue bonds, Series 2026C. J.P. Morgan.

The Tarrant County Cultural Education Facilities Finance Corp. (Aa3/AA-//) is set to price Wednesday $186.93 million of hospital revenue bonds (Methodist Hospitals of Dallas). HilltopSecurities.

Fremont Union High School District (Aaa/AAA//) is set to price Tuesday $153.19 million of GOs, consisting of $7 million of tax-exempt Series 2026 bonds, $93 million of taxable Series 2026 bonds and $53.19 million of refunding Series A bonds. RBC Capital Markets.

The Indiana Housing and Community Development Authority (Aaa///) is set to price Tuesday $122.305 million of social single family mortgage revenue bonds, consisting of $80.27 million of non-AMT Series A-1 bonds and $42.035 million of taxable Series A-2 bonds. J.P. Morgan.

The Oxnard Union High School District (Aa3///) is set to price Tuesday $103.99 million of GOs, consisting of $75 million of Series A Election of 2024 bonds, $16.98 million of forward delivery 2026 refunding bonds and $12.01 million of 2025 refunding bonds. Baird.

Competitive
The Huron Valley School District, Michigan, (/AA//) is set to sell $157.245 million of 2026 school building and site bonds, Series I, at 11 a.m. Eastern Tuesday.

Harford County, Maryland, (Aaa/AAA/AAA/) is set to sell $110 million of GO consolidated public improvement bonds, Series 2026A, at 10:15 a.m. Tuesday.

Jessica Lerner contributed to this report.