Bonds

Municipals were slightly weaker Monday, but outperformed U.S. Treasuries which saw larger losses across the curve. Equities sold off.

Triple-A yields rose one to four basis points while U.S. Treasury yields rose up to 11 with the largest losses out long.

The two-year muni-to-Treasury ratio Monday was at 63%, the three-year at 61%, the five-year at 59%, the 10-year at 58% and the 30-year at 81%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 64%, the three-year at 62%, the five-year at 60%, the 10-year at 61% and the 30-year at 83% at 3:30 p.m.

April continues to be “harsh” for munis as the asset class has given up roughly 72 basis points in the first two weeks of the month, bringing year-to-date losses to 1.11%, said Jason Wong, vice president of municipals at AmeriVet Securities.

USTs are posting losses of -1.74% in April and -4.58% year-to-date while corporates are in the red at -1.84% in April and -2.24% so far in 2024.

Muni yields rose last week, marking five consecutive weeks of rising weeks.

The 10-year note rose 3.7 basis points to close the week at 2.67%, Wong said.

Since the start of April, yields have risen even further, with munis rising by an average of 14.5 basis points across the curve, he said.

“If this trend continues, this will be the third successive loss for April,” he said.

“Increased volatility can be expected in the back half of the month, brought on by heightened geopolitical events, growing municipal supply and waning reinvestment values,” said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.

After a “modest pullback” following Wednesday’s consumer price index report, generic muni indices “captured some relief following a UST rally,” she said.

However, with the hotter-than-expected inflation number last Wednesday, which “sparked a selloff in Treasuries and munis,” many market participants are starting to accept that rate cuts may be pushed into the fourth quarter of 2024 or even 2025, Wong said.

After five straight weeks of rising yields, “buyers seemed eager to put cash to work, especially as they began to look ahead to the May through September period, where a seasonally strong technical environment typically proves supportive to muni prices,” Birch Creek strategists said in a report.

On the primary side, large deals like gilt-edged Harvard University, “saw modest subscriptions at just 3.5x, though came with a concession, printing MMD +8 in 10y vs typical spreads closer to flat,” they noted.

Investors will be greeted with a $7.216 billion new-issue calendar, led by the Florida State Board of Administration Finance Corp. (Aa3/AA/AA/AA/) with $1.5 billion of taxable revenue bonds.

There are several other large deals on tap.

The Florida Development Finance Corp. is set to price $2 billion of tax-exempt Brightline Florida Passenger Rail Project revenue bonds.

The Triborough Bridge and Tunnel Authority is set to price the week of May 6 $950 million of payroll mobility tax senior lien green bonds.

Houston is set to price $845 million of combined utility system first lien revenue refunding bonds.

Energy Southeast is set to price on April 29 $750 million of energy supply revenue bonds.

The Port Authority of the State of New York and New Jersey is set to price the week of April 22 $600 million of new-money and refunding bonds.

Muni mutual funds continued to see inflows, as investors added $414 million for the week ending Wednesday after $79.9 million of inflows the previous week. This marks seven consecutive weeks of inflows.

“Unless there is a meaningful reversal in fund flows that chips away at the excess cash balances, it’s hard to see what might derail this relative muni strength,” Birch Creek strategists said.

AAA scales
Refinitiv MMD’s scale was cut two to three basis points: The one-year was at 3.36% (+2) and 3.13% (+2) in two years. The five-year was at 2.73% (+3), the 10-year at 2.70% (+3) and the 30-year at 3.85% (+2) at 3 p.m.

The ICE AAA yield curve was cut one to three basis points: 3.36% (+1) in 2025 and 3.14% (+2) in 2026. The five-year was at 2.75% (+2), the 10-year was at 2.75% (+2) and the 30-year was at 3.82% (+2) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was cut two to three basis points: The one-year was at 3.40% (+2) in 2025 and 3.17% (+2) in 2026. The five-year was at 2.76% (+2), the 10-year was at 2.75% (+3) and the 30-year yield was at 3.85% (+3), according to a 3 p.m. read.

Bloomberg BVAL was cut three to four basis points: 3.39% (+3) in 2025 and 3.17% (+3) in 2026. The five-year at 2.70% (+4), the 10-year at 2.70% (+4) and the 30-year at 3.88% (+4) at 3:30 p.m.

Treasuries were weaker across the curve.

The two-year UST was yielding 4.932% (+4), the three-year was at 4.784% (+6), the five-year at 4.644% (+9), the 10-year at 4.627% (+11), the 20-year at 4.855% (+11) and the 30-year at 4.737% (+11) at 3:30 p.m.

Primary to come
The Florida State Board of Administration Finance Corp. (Aa3/AA/AA/AA/) is set to price Wednesday $1.5 billion of taxable revenue bonds, Series 2024A. Morgan Stanley.

The Board of Regents of the University of Texas System (Aaa/AAA/AAA/) is set to price Tuesday $527.465 million of revenue financing system bonds, Series 2024A. J.P. Morgan.

The New York City Municipal Water Finance Authority (Aa1/AA+/AA+/) is set to price Tuesday $450 million of water and sewer system second general resolution revenue bonds Fiscal 2024 Series CC, consisting of $400 million of Subseries CC-1, serial 2054 and $50 million of Subseries CC-2. Barclays.

The Arizona Board of Regents is set to price Tuesday $380.890 million of Arizona State University system revenue bonds, consisting of $151.745 million of green tax-exempt, Series 2024A, serials 2025-2044, terms 2049, 2054; $168.690 million of tax-exempt bonds, Series 2024B, serials 2025-2044; and $60.455 million of taxable bonds, Series 2024C, serials 2025-2039, term 2045. Wells Fargo Bank.

The Regents (Aa3/AA-//) is set to price Thursday $150.655 million of Arizona State University SPEED revenue bonds, Series 2024. Goldman Sachs.

The Ohio Water Development Authority (Aaa/AAA//) is set to price Tuesday $350 million of Water Pollution Control Loan Fund bonds, consisting of $180.190 million of Series 2024A and $169.810 million of Series 2024B. Goldman Sachs.

The Indiana Housing and Community Development Authority (Aaa//AA+/) is set to price Wednesday $198.945 million of single-family mortgage revenue bonds, consisting of $85.935 million of non-AMT social bonds, 2024 Series B-1; $4.065 million of AMT social bonds 2024 Series B-2; and $108.945 million of taxable social bonds, 2024 Series B-3. J.P. Morgan.

The Washington State Housing Finance Commission (/BBB-//) is set to price Thursday $189.995 million of Radford Court and Nordheim Court Portfolio nonprofit revenue bonds, Series 2024, serials 2028-2039, terms 2044, 2049, 2054, 2059. Barclays.

The Jersey City Municipal Utilities Authority is set to price Tuesday $189.595 million, consisting of $25 million of Series 2024A, serial 2025; $80 million of Series 2024B, serial 2025; $50 million of Series 2024C (Aa3///), serials 2025-2044, terms 2049, 2054; and $35.595 million of Series 2024D (Aa3///), serials 2028-2039, terms 2044, 2049, 2054. Stifel.

The Oklahoma Capital Improvement Authority (/AA-/AA-/) is set to price Thursday $167.900 million of state facilities refunding revenue bonds, consisting of $121.360 million of Series 2024A, serials 2025-2030, and $46.540 million of Series 2024B, serials 2025-2034. RBC Capital Markets.

The Oregon Department of Administrative Services (Aa2/AAA//) is set to price Thursday 147.650 million of tax-exempt Oregon State Lottery revenue refunding bonds, consisting of $92.895 million of 2024 Series A, $29.465 million of 2024 Series and $25.290 million of 2024 Series D. Goldman Sachs.

Wake County, North Carolina, (Aa1/AA+/AA+/) is set to price Thursday $137 million of limited obligation bonds, Series 2024A, serials 2025-2043. Truist.

Competitive
The Leon County-City of Tallahassee Blueprint Intergovernmental Agency (Aa2//AA/) is set to sell Tuesday $121.570 million of sales tax revenue bonds, Series 2024, at 11 a.m. eastern Tuesday.

The Virginia College Building Authority (Aa1/AA+/AA+/) is set to sell $301.805 million of 21st Century College and Equipment Programs educational facilities revenue bonds, Series 2024A, Bidding Group 1, at 10:45 a.m. Tuesday and $337.900 million of 21st Century College and Equipment Programs educational facilities revenue bonds, Series 2024A, Bidding Group 2, at 11:15 a.m. Tuesday.

The Charleston County School District is set to sell $146.005 million of Sales Tax Projects – Phase V GO bond anticipation notes at 11 a.m. Wednesday.

Albuquerque, New Mexico, (/AAA//) is set to sell $111.850 million of GO general purpose bonds, Series 2024A, and GO storm sewer bonds, Series 2024B, at 11 a.m. Thursday.

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