Primary muni bond market tops $6B led by NYC; pressure mounting

The story stays the same and that is munis remain rich but an uptick in supply will bring some pressure to the asset class.

The steadiness of the muni market, despite the swings in USTs, shows both the trepidation of investor commitment at these levels and the underlying strength of the credit quality of the asset class that can’t justify tethering itself completely to USTs.

Triple-A yield curves were little changed Friday ahead of a larger — but not too large — new-issue calendar. USTs were also firmer and equities closed out the week mixed.

While the drumbeat persists that some pressure is around the corner, the muni market has outperformed U.S. Treasuries and corporates, with high-yield and short-end munis in the black so far in February.

Indeed, the broad Bloomberg Municipal Index is down only 0.10% and 0.61% month- and year-to-date, respectively, high yield is in the black at +0.25% in February, while down 0.22% YTD and the short index is returning 0.15% month-to-date and 0.30% in 2024.

Treasuries are in the red at -1.72% in February and -3.55% year-to-date while corporates are -1.59% in February and -1.76% year to date.

“The market is not going anywhere in a hurry, and seems stuck in a rut,” said Barclays PLC strategists.

“Supply has picked up (but not overwhelmingly), large outflows have stopped, and investors seem to have cash ready to put to work,” said Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel.

Barclays notes the disparity between USTs and munis will make adjustments to valuations slow.

The two-year muni-to-Treasury ratio Friday was at 58%, the three-year at 58%, the five-year at 57%, the 10-year at 58% and the 30-year at 82%, according to Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 59%, the three-year at 57%, the five-year at 56%, the 10-year at 58% and the 30-year at 80% at 3:15 p.m.

As most participants have been noting, so much for munis will depend on new-issue supply, perhaps more than what happens with Treasuries on a day-to-day basis.

February issuance will likely end up heavier than last year but well below the five-year average, Barclays noted.

While Bond Buyer 30-day visible supply sits at about $10 billion, forward supply “is still far off its highs,” they said.

The week ahead boasts some big-name issuers and rare credits, which should provide interesting price discovery.

The new-issue calendar totals $6.08 billion, with a larger competitive calendar coming in at $2.368 billion.

New York City leads the negotiated calendar with a mega $1.5 billion general obligation bond sale.

The Bay Area Toll Authority put out notice on its website that it is set to price Wednesday $662.555 million of San Francisco Bay Area Toll Bridge variable rate revenue bonds in several series.

Wisconsin will bring $450 million of GO refunding bonds and forward-delivery GO refunding bonds.

The Guam Waterworks Authority (Baa2/A-//) is set to refund and tender $134 million of water and wastewater system revenue refunding bonds.

In the competitive space, gilt-edged California Infrastructure and Economic Development Bank is set to sell $268.595 million of green Clean Water and Drinking Water State Revolving Fund revenue bonds Tuesday while the New Jersey Education Facilities Authority brings more Princeton University revenue bonds Wednesday.

The Virginia Transportation Board is set to sell more than $400 million of Transportation Capital Projects revenue refunding bonds Wednesday.

“In our view, a combination of heavier issuance and lower redemptions should have a negative effect on technicals, as net tax-exempt supply is expected to pick up next month,” Barclays said. “Adding to that continued economic strength, that should result in elevated rate volatility, which, coupled with a lack of inflows and current richness of the muni market, would keep investors on the sidelines until valuations become more attractive.”

AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.96% and 2.74% in two years. The five-year was at 2.44%, the 10-year at 2.46% and the 30-year at 3.59% at 3 p.m.

The ICE AAA yield curve was bumped in spots: 2.97% (+1) in 2025 and 2.78% (+1) in 2026. The five-year was at 2.47% (unch), the 10-year was at 2.49% (+1) and the 30-year was at 3.58% (+3) at 3:30 p.m.

The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.95% in 2025 and 2.74% (-1) in 2026. The five-year was at 2.44% (-1), the 10-year was at 2.47% (unch) and the 30-year yield was at 3.57% (unch), according to a 3 p.m. read.

Bloomberg BVAL was little changed: 2.96% in 2025 and 2.81% in 2026. The five-year at 2.46%, the 10-year at 2.53% and the 30-year at 3.65% at 3:30 p.m.

Primary to come
New York City (Aa2/AA/AA/AA+/) is set to price Wednesday $1.509 billion of GOs, consisting of $1.2 billion of Fiscal Series 2024-C, serials 2026-2049, term 2054; $85.030 million of Fiscal 2006 Series J, Subseries J-A, serials 2032-2036; $36.855 million of Fiscal 2008 Series A, Subseries A-4, serials 2024-2026; $93.625 million of Fiscal 2008 Series C, Subseries C-4, serials 2026-2027; and $93.850 million of Fiscal 2009 Series B, Subseries B-3, serials 2026-2027. BofA Securities.

The Bay Area Toll Authority is set to price Wednesday $662.555 million of San Francisco Bay Area Toll Bridge variable rate revenue bonds, consisting of $85 million of 2024 Series A (/AA+/AA/), $110 million of 2024 Series B (/AA+/AA/), $102.555 million of 2024 Series C (/AA+/AA/), $152.840 million of 2024 Series D (/AAA/AAA), $97.160 million of 2024 Series E (/AAA/AAA) and $115 million of 2024 Series G (/AAA/AAA). J.P. Morgan.

The Hurst-Euless-Bedford Independent School District, Texas, (/AAA/AAA/) is set to price Thursday $600 million of unlimited tax school building bonds, Series 2024. Jefferies.

Wisconsin is set to price $450 million of GO refunding bonds of 2024, Series 1, and forward-delivery GO refunding bonds of 2025, Series 1. BofA Securities.

The Texas Transportation Commission (Aaa/AAA//) is set to price Tuesday $351.760 million of State Highway Fund first tier revenue refunding bonds, Series 2024, serials 2024, 2030, 2032-2033. Ramirez & Co.

MMH Master (/BBB+//) is set to price Tuesday $290 million of military housing taxable pooled project surplus cash flow Class I bonds, Series 2024A, serials 2034, 2044. Stifel, Nicolaus & Co.

The Wylie Independent School District, Texas, (Aaa///) is set to price Wednesday $277.385 million of PSF-insured unlimited tax school building bonds, Series 2024. Jefferies.

The Pennsylvania Housing Finance Agency (Aa1/AA+//) is set to price Tuesday $206.660 million non-AMT social single family mortgage revenue bonds, Series 2024-144A, serials 2034-2036, terms 2039, 2044, 2049, 2051, 2054. RBC Capital Markets.

The Monmouth County Improvement Authority, New Jersey, is set to price Tuesday $192.544 million of Governmental Pooled Loan Project refunding notes, Series 2024, serial 2025. Raymond James.

Midland County, Texas, (/AA+/AAA/) is set to price Thursday $170 million of certificates of obligation, Series 2024, serials 2025-2044. Frost Bank.

The National Finance Authority (/A+//) is set to price Thursday $168.940 million of tax-exempt social affordable housing certificates, Series 2024-1, Class A. KeyBanc Capital Markets.

Rhode Island Housing (Aa1///) is set to price Wednesday $160 million of homeownership opportunity bonds, consisting of $125 million of non-AMT social bonds, Series 82-A; $9 million of taxable, Series 82-T-1; and $26 million of taxable, Series 82-T-2. RBC Capital Markets.

The Phoenix Union High School District No. 210, Arizona, (Aa1/AA/AAA/) is set to price Tuesday $143.960 million of Project of 2023 school improvement bonds, Series 2024A. , serials 2024-2039. Stifel, Nicolaus & Co.

The Guam Waterworks Authority (Baa2/A-//) is set to price Thursday $134 million of water and wastewater system revenue refunding bonds, consisting of $82.475 million of Series 2024A and $51.525 million of Series 2024B. RBC Capital Markets.

The Utah Housing Corp. (Aa2///) is set to price Wednesday $115.880 million of taxable single family mortgage bonds, 2024 Series D, serials 2025-2036, terms 2039, 2044, 2050, 2054. Barclays.

The Regents of the University of Minnesota (Aa1/AA//) is set to price Tuesday $107.700 million of GO refunding bonds, Series 2024A, serials 2025-2044. BofA Securities.

The Dormitory Authority of the State of New York (Baa2/BBB//) is set to price Tuesday $100 million of New York Institute of Technology revenue bonds, Series 2024. Morgan Stanley.

The Eagle County School District RE 50J, Colorado, (Aa1///) is set to price Wednesday $100 million of GOs, Series 2024, serials 2036-2043. RBC Capital Markets.

Competitive
The California Infrastructure and Economic Development Bank (Aaa/AAA/AAA/) is set to sell $268.595 million of green Clean Water and Drinking Water State Revolving Fund revenue bonds, Series 2024, at 11:30 a.m., Eastern, Tuesday.

Oyster Bay, New York, is set to sell $165.857 million of water district notes, Series 2024, at 10:45 a.m. Tuesday.

The New Jersey Education Facilities Authority is set to sell $423.125 million of Princeton University revenue bonds, 2024 Series A-1, at 10:45 a.m. Wednesday, and $389.050 million of Princeton University revenue bonds, 2024 Series A-2, at 11:15 a.m. Wednesday/

The Virginia Transportation Board is set to sell $205.275 million of Transportation Capital Projects revenue refunding bonds, Series 2024, Bidding Group 1, at 10:30 a.m. Wednesday, and $214.580 million of Transportation Capital Projects revenue refunding bonds, Series 2024, Bidding Group 2, at 11 a.m. Wednesday.

The Lehigh County Authority, Pennsylvania, is set to sell $165.980 million of water and sewer revenue bonds, Series 2024, at 11:15 a.m. Wednesday.

Jessica Lerner contributed to this report.

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