Municipals were little changed Thursday as muni mutual funds saw inflows come in strong and another busy day in the primary market, led by an upsized $3.2 billion of transportation bonds from the New Jersey Transportation Trust Fund Authority. U.S. Treasuries were weaker, with the greatest losses out long, and equities ended up.
The two-year muni-to-Treasury ratio Thursday was at 62%, the three-year at 62%, the five-year at 63%, the 10-year at 68% 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 64%, the three-year at 64%, the five-year at 64%, the 10-year at 69% and the 30-year at 84% at 3:30 p.m.
High-yield funds saw inflows of $36.1 million, down from $308.3 million the week prior.
Positive fund flows have accompanied the last six Fed easing cycles, going back to 1992, according to J.P. Morgan strategists.
This “usually means rates are coming down and returns are positive, and that tends to drive flows in the muni market,” said Brad Libby, a fixed-income portfolio manager and credit analyst at Hartford Funds.
Over the past several weeks, there has been a surge of supply, with more issuance is on tap.
“Buyer interest comes as forward supply is projected around $20 billion (the high water mark over the last year) while offsetting calls and maturities sit about $2 billion lower, creating a net supply surplus,” said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.
Part of the influx stems from the backlog of deals and projects, made worse by market disruptions since COVID, and spiking interest rates, said Jeff Timlin, a partner at Sage Advisory.
Now issuers are “releasing” the backlog and coming to market, he said.
Some of the “yieldier” and A-rated credits have seen good oversubscription upon coming to market over the past several weeks, Libby said.
However, deals rated AA or higher have come at a little bit of a concession than where they’ve been trading historically to get done, he said.
The primary market was busy Wednesday and Thursday: Pennsylvania sold $1.6 billion of GOs in three series on Wednesday, while the New Jersey Transportation Trust Fund Authority priced an upsized $3.2 billion of transportation bonds in two deals and Chicago priced $1.6 billion of Chicago O’Hare International Airport general airport senior lien revenue bonds, both on Thursday.
All three billion-dollar-plus deals are expected to do “pretty well,” Libby said.
One series of Pennsylvania GOs that priced on Wednesday saw 5s due 2034 at 2.95%, or +17/MMD, compared to a December 2023 sale where a comparable 10-year maturity priced at +10/MMD but at a yield of 2.67%, Olsan noted.
Thursday’s pricings of New Jersey Transportation bonds and Chicago O’Hare airports can be expected to “draw solid order books,” she said.
In the primary market Thursday, BofA Securities priced for the New Jersey Transportation Trust Fund Authority (A2/A-/A/) $1.787 billion of tax-exempt transportation system bonds, 2024 Series A, with 5s of 6/2032 at 3.20%, 5s of 2034 at 3.38% and 5.25s of 2039 at 3.58%, callable 12/15/2034.
BofA Securities also priced for The New Jersey Transportation Trust Fund Authority (A2/A-/A/A/) $1.462 billion of transportation program bonds. The first tranche, $822.03 million of tax-exempts, Series 2024-AA, saw 5s of 6/2039 at 3.64% and 5s of 2042 at 3.85%, callable 12/15/2034.
Pricing details for the second tranche, $640.475 million of taxables, Series 2024-BB, were unavailable as of 3:30 p.m. Thursday.
J.P. Morgan preliminarily priced for Chicago (/A+/A+/A+/) $1.574 billion of Chicago O’Hare International Airport general airport senior lien revenue bonds. The first tranche, $518.33 million of AMT refunding bonds, Series 2024C, saw 5s of 1/2025 at 4.02%, 5s of 2029 at 3.39%, 5s of 2034 at 3.86%, 5s of 2039 at 4.05%, 5.25s of 2044 at 4.24% and 5.25s of 2046 at 4.30%, callable 1/1/2035.
The second tranche, $836.93 million of non-AMT refunding bonds, Series 2024D, saw 5s of 1/2025 at 3.52%, 5s of 2029 at 2.87%, 5s of 2034 at 3.26%, 5s of 2039 at 3.50%, 5s of 2044 at 3.86% and 5s of 2046 at 3.97%, callable 1/1/2035.
The third tranche, $157.885 million of AMT bonds, Series 2024E, saw 5s of 1/2025 at 4.02%, 5s of 2029 at 3.39 and 5s of 2032 at 3.72%, noncall.
The fourth tranche, $61.175 million of non-AMT bonds, Series 2024F, saw 5s of 1/2025 at 3.52%, 5s of 2029 at 2.87% and 5s of 2032 at 3.14%, noncall.
Goldman Sachs priced for the Black Belt Energy Gas District (A2///) $845.08 million of gas project revenue bonds, 2024 Series B, with 5s of 9/2026 at 3.60%, 5s of 2029 at 3.60% and 5s of 2032 at 3.85%, make whole call.
BofA Securities priced for the Dormitory Authority of the State of New York (Baa3/BBB-//) $500 million of White Plains Hospital Obligated Group revenue bonds, saw 5s of 10/2029 at 3.29%, 5s of 2034 at 3.71%, 5s of 2039 at 3.63% (AGM-insured), 5.25s of 2044 at 3.96% (AGM-insured), 5.25s of 2049 at 4.45% (AGM-insured) and 5.5s of 2054 at 4.21% (AGM-insured), callable 10/1/2034.
BofA Securities priced for the Dormitory Authority of the State of New York (Baa3/BBB-//) $125.425 million of Montefiore Obligated Group Revenue bonds, with 5s of 11/2025 at 3.50%, 5s of 2030 at 3.41%, 5s of 2034 at 3.76%, 5.25s of 2039 at 4.00%, 5.5s of 2044 at 4.23% and 5.5s of 2047 at 4.33%, callable 11/1/2034.
In the competitive market, the Metropolitan Governments of Nashville and Davidson Counties, Tennessee, (Aa2/AA+//AA+/) sold $314.47 million of GO improvement bonds, Series 2024C, to J.P. Morgan, with 5s of 1/2040 at 3.30%, 4s of 2044 at 3.95% and 4s of 2045 at par, callable 1/1/2034.
The issuer also sold $266.7 million of GO improvement bonds, Series 2024A, to BofA Securities, with 5s of 1/2026 at 2.70%, 5s of 2029 at 2.53% and 5s of 2034 at 2.96%, noncall.
Additionally, the counties sold $206.055 million of GO improvement bonds, Series 2024B, to Oppenheimer, with 5s of 1/2035 at 2.97% and 4s of 2039 at 3.55%, callable 1/1/2034.
Suffolk County, New York, (/AA-/A/) sold $164.415 million of public improvement serial bonds, Series 2024A, to Jefferies, with 5s of 10/2025 at 2.78%, 5s of 2029 at 2.50%, 4s of 2034 at 2.93%, 3s of 2039 at 3.60% and 4s of 2042 at 3.80%, callable 10/15/2032.
AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.73% and 2.47% in two years. The five-year was at 2.44%, the 10-year at 2.78% and the 30-year at 3.66% at 3 p.m.
The ICE AAA yield curve was cut one to two basis points: 2.76% (+2) in 2025 and 2.53% (+2) in 2026. The five-year was at 2.45% (+2), the 10-year was at 2.75% (+2) and the 30-year was at 3.62% (+1) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.75% (-2) in 2025 and 2.51% (unch) in 2026. The five-year was at 2.44% (-1), the 10-year was at 2.74% (-1) and the 30-year yield was at 3.61% (unch) at 3 p.m.
Bloomberg BVAL was unchanged: 2.73% in 2025 and 2.48% in 2026. The five-year at 2.45%, the 10-year at 2.72% and the 30-year at 3.59% at 3:30 p.m.
Treasuries saw losses.
The two-year UST was yielding 3.975% (+4), the three-year was at 3.887% (+4), the five-year at 3.890% (+5), the 10-year at 4.090% (+8), the 20-year at 4.350% (+9) and the 30-year at 4.388% (+9) at 3:30 p.m.