PrintMunis steady, investor confidence is 'solid'
BY SourceMedia | MUNICIPAL | 04:23 PM EDTMunis were steady Tuesday as U.S. Treasuries were weaker and equities ended mixed.
The two-year muni-UST ratio Tuesday was at 60%, the five-year at 60%, the 10-year at 65% and the 30-year at 90%, according to Municipal Market Data's 3 p.m. EDT read. The two-year muni-UST ratio was at 61%, the five-year at 62%, the 10-year at 66% and the 30-year at 91%, according to ICE Data Services.
Muni buyers have a "clear incentive" to pull back on purchases as yields seem likely to continue moving higher and prices lower, said Matt Fabian, president of Municipal Market Analytics.
"The curve seems biased to steepen further as re-investors and other buyers needing to put cash to work minimize duration," he said.
This week, "look for deals to get priced to attract demand," said Pat Luby, head of municipal strategy at CreditSights, and Wilson Lees, an analyst at the firm.
However, even if the new-issue market sees strong demand, they don't believe it will "necessarily lead to improved dealer support for the bid-side in the secondary market as the volatility in the Treasury market, combined with still rich muni/Treasury yield ratios, makes it difficult for dealers (and underwriters) to confidently hedge duration risk and could limit their appetite for taking on inventory."
Therefore, Luby and Lees expect it will be a buyers' market this week, favoring investors in a position to provide liquidity.
This week could be the last sizable new-issue calendar before tax-related selling and/or thin seasonal reinvestment, Fabian said.
Additionally, "if mutual funds ? which have taken over for ETFs and even, to an extent, SMAs as the marginal buyer this year ? begin to see withdrawals on anti-bonds investor sentiments, future selling action may not just be about taxes," he said.
Conversely, solid but still slower-than-expected issuance this year could slow further if issuers start to delay planned issuances amid the market turmoil, Fabian said.
"And, although steep oil prices and all of the above are a meaningful threat to growth across the U.S. regions, municipal credit quality is still very strong, in particular among GOs, etc.," he said.
Investor confidence has been solid: last week's higher yields were about primary price setting rather than selling pressure, Fabian said.
So while investment-grade munis are not "insulated" from what might come, this segment is "reasonably well-prepared," he said.
Buyers should remain "poised" to capture any opportunities that come, Fabian said.
New-issue market
In the primary market Tuesday, Barclays
Raymond James priced for Jacksonville, Florida, (/AA/AA+/) $129.235 million of transportation refunding revenue bonds, with 5s of 10/2026 at 2.18%, 5s of 2031 at 2.43%, 5s of 2036 at 2.98% and 5s of 2037 at 3.06%, noncall.
J.P. Morgan priced for the Broward County School Board, Florida, (A1//A+/) $109.76 million of certificates of participation, Series 2026A, with 5s of 7/2026 at 2.38%, 5s of 2031 at 2.67% and 5s of 2033 at 2.88%, noncall.
In the competitive market, Baltimore County (Aaa/AAA/AAA/) sold $184 million of consolidated public improvement bonds to Morgan Stanley
The county sold $116.65 million of general obligation metropolitan district refunding bonds, to BofA Securities, with 5s of 3/2027 at 2.21%, 5s of 2031 at 2.35%, 5s of 2036 at 2.82%, 5s of 2041 at 3.38%, and 5s of 2046 at 4.00%, callable 3/1/2036.
Baltimore County sold $90 million of 87th issue metropolitan district bonds to BofA Securities, with 5s of 3/2027 at 2.17%, 5s of 2031 at 2.35%, 5s of 2036 at 2.82%, 5s of 2041 at 3.38%, 5s of 2048 at 4.11%, 5s of 2052 at 4.22%, and 5s of 2056 at 4.41%, callable 3/1/2036.
The issuer sold $69.63 million of consolidated public improvement refunding bonds to BofA Securities, with 5s of 3/2027 at 2.21%, 5s of 2031 at 2.35%, and 5s of 2036 at 2.82%, noncall.
AAA scales
MMD's scale was unchanged: 2.12% in 2027 and 2.13% in 2028. The five-year was 2.25%, the 10-year was 2.71% and the 30-year was 4.29% at 3 p.m.
The ICE AAA yield curve was little changed: 2.16% (unch) in 2027 and 2.18% (unch) in 2028. The five-year was at 2.30% (unch), the 10-year was at 2.72% (+1) and the 30-year was at 4.31% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.12% (unch) in 2027 and 2.13% (unch) in 2028. The five-year was at 2.25% (unch), the 10-year was at 2.69% (+1) and the 30-year yield was at 4.28% (unch) at 3 p.m.
Bloomberg BVAL was little changed: 2.14% (unch) in 2027 and 2.14% (unch) in 2028. The five-year at 2.24% (unch), the 10-year at 2.66% (unch) and the 30-year at 4.22% (+1) at 4 p.m.
U.S. Treasuries were weaker.
The two-year UST was yielding 3.584% (+5), the three-year was at 3.603% (+5), the five-year at 3.733% (+5), the 10-year at 4.152% (+5), the 20-year at 4.749% (+6) and the 30-year at 4.786% (+7) near the close.
Primary to come
California (Aa2/AA-/AA/) is set to price Wednesday $2.387 billion of various purpose GOs, consisting of $1.4 billion of new-issue bonds and $987.435 million of refunding bonds. RBC Capital Markets.
The Minnesota Municipal Gas Agency (Baa1///) is set to price $750 million of gas project revenue bonds, Series 2026A. J.P. Morgan.
The Texas Transportation Commission (Aaa/AAA/AAA//) is set to price Wednesday $250 million of GO mobility fund put remarketing bonds, Series 2014-B. FHN Financial.
The University of Texas System Board of Regents (Aaa/AAA/AAA/) is set to price Wednesday $250 million of revenue financing system bonds, Series 2026B, Subseries 2026B-1. Morgan Stanley
The Buffalo Municipal Water Finance Authority (A1///) is set to price Wednesday $127.485 million of bonds, consisting of $85.68 million of Series 2026A and $41.805 million of Series 2026B. FHN Financial.
The Florida Development Finance Corp. is set to price Thursday $120 million of nonrated AMT solid waste disposal revenue remarketing bonds (Waste Pro USA, Inc. Project), Series 2023. Barclays
The Missouri Public Utilities Commission is set to price Thursday $110 million of interim construction notes, Series 2026. D.A. Davidson.
The New York State Mortgage Agency (Aa1///) is set to price Wednesday $107.425 million of social homeowner mortgage revenue bonds, consisting of $88.655 million of non-AMT Series 274 bonds and $18.77 million of AMT Series 275 bonds. RBC Capital Markets.
The Clark-Pleasant Community School Corp. Building Corp. (/AA+//) is set to price Wednesday $106.295 million of ad valorem property tax first mortgage bonds. Stifel.
Competitive
The Omaha Metropolitan Utilities District, Nebraska, (Aa2/AA+//) is set to sell $268.415 million of water system revenue and refunding bonds at 11 a.m. Eastern Wednesday.
Westchester County, New York, (Aa1/AAA/AAA/) is set to sell $250.306 million of GOs, 2026 Series A, at 11 a.m. Wednesday.
