A steady open ahead of last large new-issue slate before election

Bonds

Municipals were little changed Monday as the market took a breather following volatility last week and ahead of what is expected to be the last sizable new-issue slate until well after the election. U.S. Treasuries were weaker and equities saw gains.

The two-year ratio Monday was at 64%, the three-year at 63%, the five-year at 64%, the 10-year at 70% and the 30-year at 84%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 66%, the three-year at 65%, the five-year at 65%, the 10-year at 70% and the 30-year at 84% at 3:30 p.m.

While the asset class is still in the red for October, it has pared back earlier losses. The Bloomberg Municipal Index is at negative 1.42% in October and positive 0.84% year to date while high-yield is at negative 1.34% and positive 6.04% in 2024 while taxable munis are negative 2.49% in October and positive 2.61% so far in 2024.

Munis have outperformed USTs for the month and the year, with govies returning negative 3.48% in October and negative 1.1% in 2024 while corporates are at 2.25% for the month and positive 2.96% for the year.

“The continued pressure of rising UST yields and heavy supply caused the muni market to crack,” last week, said Daryl Clements, a municipal portfolio manager at AllianceBernstein.

“With rates off big [last] Monday, the poor tone in munis started out of the chute,” said Birch Creek strategists in a report.

Bids wanteds volumes rose and offer sides were generally off around five basis points, while bid sides were down 10 to 15 basis points, they said.

“Despite only minor UST moves on Tuesday and Wednesday, customer sale lists surged and ended the week +50% vs recent averages, according to J.P. Morgan, while 10y+ bonds saw around a +80% jump,” Birch Creek strategists noted.

With weakness in the secondary and the heavy new-issue calendar forcing underwriters to compete, preliminary pricings were sent around with large concessions, they said, only reinforcing the weakness in the secondary.

This led to LSEG MMD seeing the largest cuts on Wednesday since April, with munis seeing “massive underperformance” versus rates, Birch Creek strategists said.

The market was able to find some stability toward the end of the week, Clements said.

“With some green on the screens on Thursday, the primary calendar winding down, and much more attractive absolute and relative yields, muni buyers jumped back in,” they said.

New issues “freed up with strong interest on the break,” such as the $1.5 billion of future tax-secured subordinate bonds from the New York City Transitional Finance Authority (Aa1/AAA/AAA/), which was “bid up” as much as 12 basis points on Thursday afternoon, according to Birch Creek strategists.

The strength “carried over” into Friday as munis trading another five to seven basis points in early morning, but following a USTs selloff that afternoon, the muni underperformance ended up at only three to five basis points, they said.

This week’s calendar comes in “hot” again, Birch Creek strategists said.

Supply this week includes “two state GOs, a well-known university, the airport in ‘the city that care forgot,’ and two interesting insured deals,” said Pat Luby, head of municipal strategy at CreditSights.

Most of The Bond Buyer 30-day visible supply, which sits at $14.49 billion, should be priced this week.

There are no major deals on the calendar for next week due to the election, and that is not expected to change, Luby said.

If the outcome of election “causes rates to shoot higher, munis will follow suit in some capacity, but a better technical environment should help its relative performance,” Birch Creek strategists said.

AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.83% and 2.65% in two years. The five-year was at 2.64%, the 10-year at 2.97% and the 30-year at 3.82% at 3 p.m.

The ICE AAA yield curve was little changed: 2.94% (unch) in 2025 and 2.70% (unch) in 2026. The five-year was at 2.66% (+1), the 10-year was at 2.97% (unch) and the 30-year was at 3.76% (unch) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was bumped: The one-year was at 2.87% (unch) in 2025 and 2.68% (unch) in 2026. The five-year was at 2.66% (-1), the 10-year was at 2.95% (unch) and the 30-year yield was at 3.76% (unch) at 3 p.m.

Bloomberg BVAL was unchanged: 2.83% in 2025 and 2.64% in 2026. The five-year at 2.67%, the 10-year at 2.99% and the 30-year at 3.79% at 3:30 p.m. 

Treasuries were weaker.

The two-year UST was yielding 4.137% (+3), the three-year was at 4.085% (+3), the five-year at 4.106% (+4), the 10-year at 4.273% (+3), the 20-year at 4.618% (+3) and the 30-year at 4.525% (+3) at the close.

Primary to come
Washington (Aaa/AA+/AA+/) is set to price Wednesday $1.55 billion of general obligation bonds consisting of $886.245 million of various purpose GO refunding bonds, Series R-25B, serials 2025-2039; and $664.155 million of motor vehicle fuel tax and vehicle related fees GO refunding bonds, Series R-25C, serials 2025-2039, 2042. BofA Securities.

The Pennsylvania Higher Educational Facilities Authority (A3/A/A/) is set to price Wednesday $1.107 billion of Thomas Jefferson University fixed-rate revenue bonds, consisting of $655 million of tax-exempt Series 2024B-1 bonds, $285 million of tax-exempt Series 2024B-2 bonds and $168 million of taxable Series 2024C bonds. J.P. Morgan.

The Miami-Dade County Educational Facilities Authority (A2/A-//) is set to price Tuesday $860 million of University of Miami issue bonds, consisting of $552 million of revenue and revenue refunding bonds, Series 2024A, serials 2025-2048; and $308 million of revenue refunding bonds, Series 2024B, serials 2030-2045. Barclays.

The New Orleans Aviation Board (A2//A/) is set to price Wednesday $597.4 million of general airport revenue bonds, consisting of $47.575 million of non-AMT refunding bonds, Series 2024A, serials 2026-2045; $455.435 million of AMT refunding bonds, Series 2024B, serials 2026-2045; $19.875 million of non-AMT bonds, Series 2024C01, term 2054l $69.395 million of AMT bonds, Series 2024C-2, serials 2029-2045, term 2049, 2051; and $5.12 million of taxables, Series 2024C-3, serials 2026-2029. BofA Securities.

Philadelphia (A1/A+/A+/) is set to price $558.37 million of water and wastewater revenue bonds, Series 2024C. Siebert Williams Shank.

The Virginia Housing Development Authority (Aaa/AAA//) is set to price Tuesday $455.48 million of commonwealth mortgage bonds, consisting of $80 million of non-AMT bonds, Series D, serials 2026-2036, terms 2039, 2044, 2049, 2055; $160 million of taxables, Series E, serials 2026-2034, terms 2039, 2044, 2049, 2055; and $215.48 million on non-AMT bonds, Series F, serial 2055. Wells Fargo.

Atlanta (Aa3/A+//) is set to price Tuesday $383.51 million of water and wastewater subordinate lien sustainability revenue bonds. J.P. Morgan.

The Harris County-Houston Sports Authority (A2/AA//) is set to price Tuesday $329.68 million of Assured Guaranty-insured revenue refunding bonds, consisting of $207.575 million of senior lien bonds, Series 2024A, serials 2025-2044, term 2047; and $122.105 million of second lien bonds, Series 2024B, serials 2025-2044, term 2046. Wells Fargo.

The Indiana Housing and Community Development Authority (Aaa//AA+/) is set to price Tuesday $198.62 million of single-family mortgage social revenue bonds, consisting of $97 million of non-AMT Series D-1 bonds, $3 million of AMT Series D-2 bonds and $99 million of taxable Series D-3 bonds. J.P. Morgan.

The School District of Pasco County, Florida, (Aa3//AA/) is set to price Tuesday $197.195 million of sales tax revenue bonds, serials 2025-2039. BofA Securities.

The Build NYC Resource Corp. is set to price Tuesday $150 million of tax-exempt Success Academy Charter Schools Project revenue bonds. PNC Capital Markets.

The Nebraska Investment Finance Authority (/AAA//) is set to price Wednesday $130.51 million of single-family housing revenue bonds, consisting of $96 million of social non-AMT Series G bonds and $35 million of taxable Series H bonds. J.P. Morgan.

The Brownsburg 1999 School Building Corp., Indiana, (/AA+//) is set to price Tuesday $120.36 million of ad valorem property tax first mortgage bonds, Series 2024 A, serials 2025-2044, insured by Indiana State Aid Intercept Program. Stifel, Nicolaus & Co.

The Maine State Housing Authority (Aa1/AA+//) is set to price Tuesday (retail Monday) $110 million of mortgage purchase social bonds, 2024 Series F, serials 2026-2029, terms 2044, 2049, 2054. Barclays.

The Atlanta Urban Redevelopment Agency (Aa1//AAA/) is set to price Wednesday $103.735 million of surface transportation and infrastructure projects revenue bonds, Series 2024B, serials 2025-2044. Ramirez.

Competitive
California (Aa2/AA-/AA/) is set to sell $471.995 million of various purpose GO refunding bonds, Bid Group B, at 11:45 a.m. Tuesday, $324.965 million of taxable various purpose GOs, Bid Group A, at 11 a.m. Tuesday; and $55.445 million of taxable various purpose GO refunding bonds, Bid Group A, at 11 a.m. Tuesday.

The Frisco Community Development Corp. is set to sell Tuesday $197.265 million of taxable sales tax revenue bonds at 11:15 a.m. Tuesday.

Pender County, North Carolina, (Aa2/AA//) is set to sell Tuesday $144 million of GO school bonds at 11 a.m. Tuesday.

The Pinellas County School District, Florida, is set to sell $100 million of tax anticipation notes at 11 a.m. Tuesday.

The City and County of San Francisco (Aa2/AA+/AA+/) is set to sell $118.705 million of multiple capital improvement projects certificates of participation, Series 2024A, at 11:30 a.m. Thursday.

The Charleston County School District is set to sell $115.065 million of GOs at 11 a.m. Thursday.

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