PrintMunis richen on front end, USTs barely move
BY SourceMedia | MUNICIPAL | 04:04 PM ESTMunis were richer in spots Tuesday as U.S. Treasuries were little changed and equities ended down.
The two-year muni-UST ratio Tuesday was at 61%, the five-year at 58% the 10-year at 61% and the 30-year at 88%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 61%, the five-year at 57%, the 10-year at 62% and the 30-year at 87%, according to ICE Data Services.
Muni yields saw small gains Tuesday on the front end of the curve. This comes after a front-end rally of 20 basis points in January, while the 30-year was three basis points cheaper, dissimilar to the minimal changes to AAA muni yields in November and December, said Matt Fabian, president of Municipal Market Analytics.
"This highlights the influx of retail? and safety-based demand that appears to have pivoted from money funds (which have lost $11.3 billion in assets since the first week of the year) into ETFs (up $9.6B YTD) and perhaps SMAs," he said.
While SMAs are still present in buying ? pushing the average trade size below $200,000 last month ? their presence may have "tapered," he said.
This reflects "less attractive nominal yields (longer AAAs are yielding 35 bps less than during last summer's SMA-powered volume surge) and lower/richer relative yields (M/T ratios have dropped about 10-plus ratios since the summer as well)," Fabian said.
Last week would have marked the beginning of reinvestment buying for a stronger month of principal amortization, helping explain the "extended pricing strength," he said.
Storms and schedules have limited growth in the new-issue market lately, but calendar expectations are increasing, he said.
Issuance, though, is lighter this week, with only $6.7 billion in supply.
Supply should be "well-received, given strong inflows and the increase in reinvestment capital for the new month," said Chris Brigati, managing director and CIO at SWBC, and Ryan Riffe, senior vice president of capital markets at the firm.
Additionally, "with Feb. 1 coupon payments hitting on Monday, there should be sufficient demand to take down this light calendar," said Daryl Clements, municipal portfolio manager at AllianceBernstein
Similarly to January, February could be "coming out of the [chute] quickly," but UST-induced volatility could disrupt that strong start, he said.
February returns have been mixed, with six out of the last 10 years seeing gains, said Jason Wong, vice president of municipals at AmeriVet Securities.
"With demand continuing to remain strong, coupled with some weakness in Treasuries, along with elevated supply for February, we could see some volatility in munis potentially reversing any returns we had in January," he said.
The supply/demand technicals appear favorable this month, with $37 billion of tax-exempt supply and $41 billion of "organic cash," Clements said.
Demand could be even stronger if fund inflows continue to be sizable, he noted.
"The long end of the curve is getting some attention from investors, as 60% of flows have gone into longer strategies," Clements said, noting part of this demand may be because of the relative expensiveness of short munis.
New-issue market
In the primary market Tuesday, Wells Fargo
Stifel priced for the Cherry Creek School District No. 5 (Aa1/AA//) $316.665 million of GOs, with 5.25s of 12/2032 at 2.45%, 5.25s of 2036 at 2.80%, 5.25s of 2046 at 4.03% and 5.25s of 2048 at 4.24%, callable 12/15/2036.
J.P. Morgan priced for the Tarrant County Cultural Education Facilities Finance Corp. (Aa2/AA-//) $294.32 million of hospital revenue bonds (Baylor Scott & White Health Project). The first tranche, $149.98 million of Series 2026F, saw 5s of 11/2055 with a put date of 5/2030 at 2.65%, callable 5/1/2029.
The second tranche, $143.34 million of Series 2026G, saw 5s of 11/2055 with a put date of 5/2033 at 2.89%, callable 5/1/2032.
In the competitive market, the Huron Valley School District, Michigan, (/AA//) sold $157.245 million of 2026 school building and site bonds, Series I, to BofA Securities, with 5s of 5/2027 at 2.22%, 5s of 2031 at 2.33%, 5s of 2036 at 2.78%, 5s of 2041 at 3.45% and 5s of 2045 at 4.02%, callable 5/1/2036.
Harford County, Maryland, (Aaa/AAA/AAA/) sold $110 million of GO consolidated public improvement bonds, Series 2026A, to BofA Securities, with 5s of 10/2026 at 2.19%, 5s of 2031 at 2.25%, 5s of 2036 at 2.72%, 4s of 2041 at 3.50% and 4s of 2045 at 4.08%, callable 10/1/2035.
AAA scales
MMD's scale was bumped up to three basis points: 2.16% (-2) in 2027 and 2.16% (-2) in 2028. The five-year was 2.21% (-3), the 10-year was 2.62% (-2) 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% (-1) 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% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was bumped up to three basis points: The one-year was at 2.14% (-3) in 2027 and 2.15% (-2) in 2028. The five-year was at 2.22% (-3), the 10-year was at 2.62% (-2) and the 30-year yield was at 4.24% (unch) at 3 p.m.
Bloomberg BVAL was bumped nine years and in: 2.18% (-4) in 2027 and 2.16% (-4) in 2028. The five-year at 2.20% (-2), the 10-year at 2.60% (unch) and the 30-year at 4.16% (unch) at 4 p.m.
U.S. Treasuries barely budged.
The two-year UST was yielding 3.567% (-1), the three-year was at 3.642% (flat), the five-year at 3.831% (-1), the 10-year at 4.266% (-1), the 20-year at 4.848% (-1) and the 30-year at 4.899% (-1) 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
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.
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.
Competitive
The Washington Suburban Sanitary District, Maryland, (Aaa/AAA/AAA/) is set to sell $366.565 million of consolidated public improvement bonds of 2026 at 10:15 a.m. Eastern Thursday.
