Bonds

Municipals were little changed to end the week ahead of an estimated $6.1 billion new-issue calendar. U.S. Treasuries were firmer, and equities ended up.

Muni yields were steady throughout the week, ignoring small but “well-behaved” UST movements, which stayed “in a relatively narrow range despite some important data releases,” according to Barclays PLC strategists Mikhail Foux, Clare Pickering and Mayur Patel.

The municipal market outperformance was aided by a supply/demand imbalance that looks to be changing as issuance grows, the net negative supply picture shrinks and redemptions fall ahead of tax season.

For the time being, “muni market moves will still be quite limited and slow, while Treasuries’ moves are likely to be faster and the ranges wider,” said BofA strategists.

“Hedging … should continue to be an issue for the time being,” but “at the root of it are near record low muni/Treasury ratios,” they said. 

The two-year muni-to-Treasury ratio Friday was at 60%, the three-year at 59%, the five-year at 59%, the 10-year at 59% and the 30-year at 83%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 60%, the three-year at 58%, the five-year at 57%, the 10-year at 58% and the 30-year at 81% at 3:30 p.m.

Cautious trading “remains in order, but long-term bond investors have better prospects if Treasuries lead the way,” according to BofA strategists.

Investors are “eagerly awaiting heavier muni supply, but it remains quite manageable for now,” Barclays strategists said.

The new-issue calendar for next week is estimated at $6.089 billion, with $5.241 billion of negotiated deals and $848.2 million of competitive deals on tap.

The negotiated calendar is led by the Regents of the University of California with nearly $1 billion of general revenue bonds, followed by the Midland Independent School District, Texas, with $876 million of PSF-insured unlimited tax school building bonds, and the New York City Municipal Water Finance Authority with $758 million of water and sewer system second general resolution revenue bonds.

Cambridge, Massachusetts, leads the competitive calendar with $180.1 million of GO municipal purpose loan of 2024 bonds.

BofA strategists expect $32 billion of new issuance in March and $39 billion of principal redemptions and coupon payments.

“As such, the supply/demand environment still favors buyers, though the large imbalances in the first two months that gripped muni ratios will loosen some,” they said.

Meanwhile, Barclays strategists think tax-exempt supply will increase, most likely in the first half, due to Build America Bond extraordinary redemption provision calls, but they have “not seen any bumps to it as of yet.”

BABs will “remain in focus for some time, while MMD-UST ratios remain tight, and refunding Build America Bonds with tax-exempts makes sense,” they said.

Barclays strategists said this market “can easily handle” a $7 billion to $8 billion pipeline as of now, and “until issuance picks up, and/or there is a spike in rate volatility, tax-exempts will likely remain rich,” they said.

“We do believe that the market will start slowly cheapening this month, and we remain quite cautious, given rich valuations for high-quality tax-exempts,” Barclays strategists said.

AAA scales
Refinitiv MMD’s scale was little changed: The one-year was at 2.97% (unch, -1bp March roll) and 2.73% (unch, -1bp March roll) in two years. The five-year was at 2.44% (unch, no March roll), the 10-year at 2.46% (unch, no March roll) and the 30-year at 3.59% (unch) at 3 p.m.

The ICE AAA yield curve was little changed: 2.99% (unch) in 2025 and 2.77% (unch) in 2026. The five-year was at 2.46% (unch), the 10-year was at 2.47% (unch) and the 30-year was at 3.55% (-1) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.95% in 2025 and 2.73% in 2026. The five-year was at 2.43%, the 10-year was at 2.46% and the 30-year yield was at 3.56%, according to a 3 p.m. read.

Bloomberg BVAL was unchanged: 2.95% in 2025 and 2.80% in 2026. The five-year at 2.44%, the 10-year at 2.51% and the 30-year at 3.64% at 3:30 p.m.

Treasuries were firmer.

The two-year UST was yielding 4.539% (-9), the three-year was at 4.331% (-10), the five-year at 4.165% (-9), the 10-year at 4.185% (-6), the 20-year at 4.456% (-5) and the 30-year at 4.331% (-3) at the close.

Primary to come:
The Regents of the University of California (Aa2/AA/AA/) is set to price Tuesday $997.735 million of general revenue bonds, 2024 Series BV, serials 2024-2045. Jefferies.

The Midland Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $876.355 million of PSF-insured unlimited tax school building bonds, Series 2024, serials 2025-2054. Raymond James.

The New York City Municipal Water Finance Authority (Aa1/AA+/AA+/) is set to price Tuesday $757.655 million of water and sewer system second general resolution revenue bonds Fiscal 2024 Series BB, consisting of $208.400 million of Subseries BB-1 bonds, serial 2054, and $550 million of Subseries BB-2 bonds, 2028-2029, 2034-2036, 2039, 2044-2045, 2047. Siebert Williams Shank.

The President and Fellows of Harvard College is set to price Tuesday $750 million of taxable corporate CUSIPs, Series 2024A. Goldman Sachs.

The Texas Transportation Commission (Aaa/AAA//AAA) is set to price Wednesday $687.155 million of state of Texas highway improvement GO refunding bonds, Series 2024, serials 2025-2044. Jefferies.

The Idaho Housing and Finance Association (Aa1///) is set to price Thursday $535.790 million of single-family mortgage bonds, consisting of $290.940 million of non-AMT bonds, 2024 Series A, serials 2024-2036, terms 2039, 2044, 2049, 2054, 2054; and $244.850 million of taxables, 2024 Series B, serials 2024-2034, terms 2039, 2044, 2049, 2054. Barclays.

The Lower Colorado River Authority (/A/A+/) is set to price Wednesday $325.455 million of LCRA Transmission Services Corp. Project transmission contract refunding revenue bonds, Series 2024, serials 2026-2044, terms 2049, 2054. Wells Fargo.

The Pennsylvania Economic Development Financing Authority (Aa3/AA-//) is set to price Thursday $215 million of Villanova University revenue bonds, Series 2024. Morgan Stanley.

The Collier County Industrial Development Authority, Florida, is set to price Wednesday $197.240 million of NCH Healthcare System Projects healthcare facilities revenue bonds, consisting of $93.585 million of Series 2024A tax-exempt fixed rate bonds, $65.180 million of Series 2024B tax-exempt premium hard put bonds, and $38.475 million of Series 2024C taxable fixed rate bonds. J.P. Morgan.

The School Board of St. Johns County, Florida, (/AA//) is set to price Tuesday $169.155 million of certificates of participation, consisting of $152.665 million of new-issue COPs, Series 2024A, serials 2025-2044, term 2049; and $16.490 of refunding COPs, Series 2024B, serials 2025-2033. RBC Capital Markets.

The Sequoia Union High School District, California, (Aaa///) is set to price Wednesday $160 million of GO election of 2022 bonds, Series 2024, and 2024 GO refunding bonds. Raymond James.

The Minnesota Higher Education Facilities Authority (A2///) is set to price Wednesday $159.705 million of University of St. Thomas revenue bonds, consisting of $95.015 million of Series A bonds, serials 2035-2044, terms 2049, 2053; $25 million of Series B-1 bonds, serial 2053; $25 million of Series B-2 bonds, serial 2053; and $14.690 million of Series C bonds, serials 2030-2035. RBC Capital Markets.

The Florida Housing Finance Corp. (Aaa///) is set to price Wednesday $100 million of non-AMT homeowner mortgage revenue bonds, 2024 Series 1, serials 2026-2034, terms 2039, 2044, 2049, 2055, 2055. RBC Capital Markets.

Competitive
Cambridge, Massachusetts, (Aaa/AAA/AAA/) is set to sell $180.1 million of GO municipal purpose loan of 2024 bonds, at 11 a.m., Eastern, Wednesday.

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