Muni slightly firmer, investors prepare for CPI report

Bonds

Munis were a touch firmer in spots Tuesday as the primary market ramped up and investors awaited Wednesday’s inflation report to give further guidance on Fed rate cuts. U.S. Treasuries were firmer and equities were mixed at the close.

The two-year muni-to-Treasury ratio Tuesday was at 65%, the three-year at 64%, the five-year at 61%, the 10-year at 61% and the 30-year at 85%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 65%, the three-year at 63%, the five-year at 61%, the 10-year at 62% and the 30-year at 83% at 3:30 p.m.

“Friday’s labor market report was relatively good news for the economy but probably pushes back the timing of the first cut,” said Cooper Howard, a fixed income strategist at Charles Schwab. Wednesday’s CPI report, though, will “shed more light on the path of inflation and the potential timing for rate cuts this year.”

“Shifting expectations of when the first rate cut will occur is certainly frustrating for investors who have been positioned to take advantage of hopefully declining yields at the short end of the curve, but in our view, the current shape of the yield curve is not without opportunity,” said Pat Luby, head of Municipal Strategy at CreditSights.

“Assuming no change in yields, the one-year prospective total return for the current 12-year maturity on the benchmark AAA yield curve would be 4.6%,” he said.

Issuers, though, may be frustrated with “shifting” market expectations as some of them “may have been waiting to issue new-money bonds at, hopefully, lower yields,” according to Luby.

“With those hopes apparently dashed, at least for now, we are wondering if we might see an additional uptick in new-money borrowing,” he said.

Given the current rich relationship between tax-exempt and UST yields, Luby expects some Build America Bond issuers to continue selling tax-exempts to refund the older taxable BABs through extraordinary redemption provisions.

This year, there have been 16 unique issuers that have either called BABs, posted conditional calls or announced considerations for financing plans, totaling $9.38 billion, according to J.P. Morgan.

This week sees deals from Kentucky and the Sacramento Municipal Utility District, California, that plan to use the sales’ proceeds to refund a portion of outstanding BABs.

In the primary market Tuesday, Goldman Sachs priced for the Massachusetts Development Finance Agency (Aaa/AAA//) $734.985 million of Harvard University Issue revenue bonds, Series 2024B, with 5s of 2/2030 at 2.65%, 5s of 2034 at 2.74% and 4s of 2036 at 3.03%, make whole call.

BofA Securities priced for the Sacramento Municipal Utility District, California, (Aa2//AA/) is set to price Tuesday $402.800 million of electric revenue refunding bonds. The first tranche, $380.450 million of green bonds, Series N-1, saw 5s of 11/2029 at 2.51%, 5s of 2034 at 2.63% and 5s of 2036 at 2.82%, callable 5/15/2034.

The second tranche, $22.350 million of Series N-2, saw 5s of 11/2036 at 2.82%, callable 5/15/2034.

J.P. Morgan priced for the district $250 million of green electric revenue bonds, 2024 Series M, with 5s of 11/2038 at 2.92%, 5s of 2039 at 3.13%, 5s of 2044 at 3.54%, 5s of 2049 at 3.77% and 5s of 2054 at 3.88%, callable 5/15/2034.

Barclays priced for the Board of Regents of the University of Oklahoma (/AA//) $231.845 million of Build America Mutual-insured general revenue bonds. The first tranche, $211.735 million of tax-exempt refunding bonds, Series 2024A, with 5s of 7/2025 at 3.34%, 5s of 2029 at 2.84%, 5s of 2034 at 2.97%, 5s of 2039 at 3.35%, 5s of 2044 at 3.80%, 5s of 2049 at 4.05%, 5s of 2054 at 4.15% and 4.125s of 2054 at 4.33%, callable 7/1/2034.

Pricing details were not available for the second tranche, $20.110 million of taxables, Series 2024B, as of 3:30 p.m.

Raymond James priced and repriced for the Northside Independent School District, Texas, (Aaa//AAA/) $168.485 million of PSF-insured unlimited tax school building bonds, Series 2024A, with yields bumped three to 15 basis points: 5s of 8/2025 at 3.30% (-3), 5s of 2029 at 2.78% (-8), 5s of 2034 at 2.86% (-7), 5s of 2039 at 3.30% (-9), 5s of 2044 at 3.67% (-10), 4s of 2049 at 4.18% (-15) and 4.125s of 2054 at 4.31% (-10), callable 8/15/2033.

FHN Financial Capital Markets priced for the Northside ISD $117.660 million of PSF-insured variable rate unlimited tax school building and refunding bonds, Series 2024B, with 3.45s of 8/2054 with a mandatory put date of 8/1/2027 at par, noncall.

In the competitive market, Louisiana (Aa2/AA//) sold $293.820 million of GOs, Series 2024A, to J.P. Morgan, with 5s of 5/2025 at 3.38%, 5s of 2029 at 2.76%, 5s of 2034 at 2.79%, 5s of 2039 at 3.28% and 4s of 2044 at 4.04%, callable 5/1/2034.

The state also sold $97.020 million of GO refunding bonds, to Jefferies, with 5s of 8/2025 at 3.28% and 5s of 2027 at 2.92%, noncall.

Denver (Aaa/AAA/AAA/) sold $139.720 million of GO Rise Denver bonds, Series 2024B, to Stifel, with 5s of 8/2024 at 3.50%, 5s of 2029 at 2.70%, 5s of 2034 at 2.72%, 5s of 2039 at 3.17% and 5s of 2042 at 3.47%, callable 8/1/2034.

The issuer also sold $129.235 million of GO Elevate Denver bonds, Series 2024A, to Jefferies, with 5s of 8/2024 at 3.20%, 5s of 2029 at 2.68%, 5s of 2034 at 2.72% and 5s of 2039 at 3.18%, callable 8/1/2034.

The Orange County Sanitation District, California, (Aaa/AAA/AAA/) sold $138.580 million of wastewater refunding revenue obligations, Series 2024A, to BofA Securities, with 5s of 2/2025 at 3.06%, 5s of 2029 at 2.42%, 5s of 2034 at 2.40% and 5s of 2037 at 2.67%, callable 2/1/2034.

AAA scales
Refinitiv MMD’s scale was bumped up to two basis points: The one-year was at 3.30% (-2) and 3.09% (unch) in two years. The five-year was at 2.68% (unch), the 10-year at 2.65% (-1) and the 30-year at 3.81% (unch) at 3 p.m.

The ICE AAA yield curve was bumped up to three basis points: 3.34% (-3) in 2025 and 3.12% (-1) in 2026. The five-year was at 2.71% (unch), the 10-year was at 2.70% (-1) and the 30-year was at 3.79% (-1) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was bumped up to one basis point: The one-year was at 3.38% (unch) in 2025 and 3.12% (unch) in 2026. The five-year was at 2.71% (unch), the 10-year was at 2.67% (-1) and the 30-year yield was at 3.80% (unch), according to a 3 p.m. read.

Bloomberg BVAL was bumped up to one basis point: 3.33% (unch) in 2025 and 3.11% (unch) in 2026. The five-year at 2.62% (-1), the 10-year at 2.62% (-1) and the 30-year at 3.80% (-1) at 3:30 p.m.

Treasuries were firmer.

The two-year UST was yielding 4.744% (-4), the three-year was at 4.558% (-4), the five-year at 4.375% (-5), the 10-year at 4.363% (-6), the 20-year at 4.597% (-6) and the 30-year at 4.497% (-5) at 3:45 p.m.

Negotiated calendar:
Kentucky (A1//AA-/) is set to price next week $632.830 million of Kentucky State Property and Buildings Commission of Project No. 130 revenue bonds, consisting of $222.095 million of Series 2024A and $410.735 million of Series 2024B. BofA Securities.

The Dormitory Authority of the State of New York (Aa1/AA//) is set to price Wednesday $610 million of Cornell University revenue refunding bonds, Series 2024A, serial 2054. BofA Securities.

The South Dakota Health and Educational Facilities Authority (/AA-/AA-/) is set to price Wednesday $334.100 million of Avera Health revenue bonds, Series 2024A, serials 2025-2033, 2035-2044, and terms 2049, 2054. BofA Securities.

The Maricopa County Industrial Development Authority (A2//A+/) is set to price Thursday $323.415 million of Honor Health hospital revenue bonds, consisting of $43.030 million of new-issue bonds, Series 2024A, serial 2034; and $280.385 million of forward-delivery refunding bonds, Series 2024D. RBC Capital Markets.

The Marion County School Board, Florida, (/AA//) is set to price Thursday $296.370 million of certificates of participation, Series 2024, serials 2026-2044. BofA Securities.

The Jersey City Municipal Utilities Authority is set to price Wednesday $195 million, consisting of $30 million of Series 2024A, serial 2025; $80 million of Series 2024B, serial 2025; $50 million of Series 2024C, serials 2025-2044, terms 2049, 2054; and $35 million of Series 2024D, serials 2027-2039, terms 2a44, 2049, 2054. Stifel, Nicolaus & Co.

Charlotte, North Carolina, (Aa1/AA+/AA+/) is set to price Wednesday $120.510 million of Governmental Facilities and Equipment certificates of participation, Series 2024, serials 2024-2043. PNC Capital Markets.

The Union County Improvement Authority, New Jersey, (Aaa///) is set to price Thursday $102.270 million of Union County Administration Complex Project county-guaranteed lease revenue bonds, Series 2024, serials 2025-2044, terms 2049,2054. RBC Capital Markets.

Competitive
California is set to sell $442.635 million of taxable various purpose GOs, Bid Group A, at 11 a.m. Thursday; $441.495 million of taxable various purpose GOs, Bid Group B, at 11:30 a.m. Thursday; and $600 million of tax-exempt various purpose GOs, Bid Group C, at noon Thursday.

Broome County, New York, is set to sell $123.458 million of bond anticipation notes at 11 a.m. Thursday.

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