Municipals were mostly regular Wednesday as the most important deals of the week priced and the Investment Company Institute reported greater than $1 billion of inflows into municipal bond mutual funds. U.S. Treasuries were little modified throughout many of the curve and equities ended down near the close.
The 2-year muni-to-Treasury ratio Wednesday was at 63%, the three-year at 65%, the five-year at 66%, the 10-year at 70% and the 30-year at 87%, in line with Refinitiv Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 64%, the three-year at 65%, the five-year at 66%, the 10-year at 71% and the 30-year at 88% at 3:30 p.m.
While muni yields were little modified Wednesday, yields have continued to drop for the reason that start of summer, said Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities.
Nevertheless, he noted yields “will not be as appealing as they once were this yr, yet they continue to be near generationally attractive levels.”
The Investment Company Institute reported $1.316 billion of inflows into municipal bond mutual funds for the week ending Aug. 21 after $762 million of inflows the week prior. Exchange-traded funds saw $243 million of inflows after $175 million of inflows the previous week.
The last time inflows topped $1 billion, per ICI data, was for the week ending Feb. 7 when muni mutual funds saw $1.555 billion of inflows.
LSEG Lipper has reported weeks with $1 billion plus inflows on July 31 and May 8.
Flows into muni mutual funds proceed to “trickle in” but are still not near the common amount of 2021 when inflows topped $100 billion in total for the yr, in line with Kozlik.
Munis proceed to “show value” in comparison with corporates and Treasuries, said Cooper Howard, a fixed-income strategist at Charles Schwab.
The all-in tax rate “that will end in the identical after-tax yield for munis and company bonds is barely lower than 35% which is near the lower end of the range over the past few years and below the common for the reason that end of 2017,” he said.
Moreover, the backdrop for credit conditions stays stable, leading Howard to imagine munis will be an “attractive opportunity” for higher-tax bracket investors.
The yield curve should proceed to steepen because the Fed cuts rates, however it is unclear if there shall be a 25- or 50-basis-point rate cut on the September meeting, he said.
Federal Reserve Chairman Jerome Powell’s Friday speech at Jackson Hole “left little question that the Fed goes to chop rates in September and can likely proceed cutting them at each meeting this yr,” Howard said.
“What was most notable, wasn’t what was said, it was what Chairman Powell [did not say],” he said.
Powell’s speech didn’t mention that the pace of rate cuts shall be “gradual,” leaving room for a bigger 50 basis point cut at next month’s meeting, he said.
“The market shall be closely watching jobless claims and PCE this week for signs that the labor market is not softening too fast and inflation continues to trend lower,” Howard said.
Volatility could also be “elevated” as each reports occur before the Labor Day holiday and trading conditions will likely be “thin,” he said.
In the first market Wednesday, the ultimate large deals of the week priced. Wells Fargo preliminarily priced for Chicago (//A+/) $996.03 million of Chicago O’Hare International Airport general airport senior lien revenue bonds. Final pricing details weren’t yet available. The primary tranche, $555.305 million of AMT bonds, Series 2024A, saw 5s of 1/2036 at 3.92%, 5s of 2039 at 4.05%, 5.5s of 2044 at 4.21%, 5.25s of 2048 at 4.35%, 5.5s of 2053 at 4.40% and 5.5s of 2059 at 4.50%, callable 1/1/2034.
The second tranche, $440.725 million of non-AMT bonds, saw 5s of 1/2036 at 3.34%, 5s of 2039 at 3.52%, 5.25s of 2044 at 3.81%, 5s of 2048 at 4.07%, 5.25s of 2053 at 4.17% and 5.5s of 2059 at 4.20%, callable 1/1/2034.
J.P. Morgan preliminarily priced for San Antonio, Texas, (Aa2/AA-/AA-/) $760.19 million of electrical and gas systems revenue refunding bonds. Final pricing details weren’t yet available. The primary tranche, $489.495 million of Series 2024D, saw 5s of two/2029 at 2.68%, 5s of 2033 at 3.01%, 5s of 2039 at 3.39%, 5s of 2044 at 3.76%, 5.25s of 2049 at 4.00%, 5s of 2049 at 4.05% and 5.25s of 2054 at 4.08%, callable 2/1/2035.
The second tranche, $274.27 million of Series 2024E, saw 5s of two/2035 at 3.16%, 5s of 2039 at 3.39%, 5s of 2044 at 3.76% and 5.25s of 2049 at 4.00%, callable 2/1/2035.
Wells Fargo priced for the Utah Transit Authority $541.11 million of sales tax revenue refunding bonds. The primary tranche, $419.945 million of Series 2024, (Aa2/AA+/AA/), saw 5s of 6/2030 at 2.59%, 5s of 2034 at 2.89%, 5s of 2039 at 3.27% and 5s of 2042 at 3.47%, callable 6/15/2034.
The second tranche, $121.165 million of subordinated bonds, Series 2024, (Aa3/AA/AA/), saw 5s of 6/2030 at 2.68%, 5s of 2032 at 2.88%, 5s of 2039 at 3.35% and 5s of 2040 at 3.40%, callable 6/15/2034.
Jefferies priced for the Texas Veterans Land Board (Aaa///) $135 million of taxable refunding veterans bonds, Series 2024A, with 5/375s of 12/2051 priced at par.
BofA Securities priced for the University of Kentucky (Aa3/AA//) $104.85 million of UK Healthcare Cancer Center Parking project lease purchase obligations, Series 2024, with 5s of 10/2025 at 2.73%, 5s of 2029 at 2.70%, 5s of 2034 at 3.12%, 5s of 2039 at 3.41%, 4s of 2044 at 4.04%, 5s of 2049 at 3.99% and 4.125s of 2054 at 4.32%, callable 10/1/2034.
AAA scales
Refinitiv MMD’s scale was little modified: The one-year was at 2.51% (unch) and a couple of.45% (unch) in two years. The five-year was at 2.42% (unch), the 10-year at 2.69% (unch) and the 30-year at 3.58% (+1) at 3 p.m.
The ICE AAA yield curve was cut on bonds on 2033 and out: 2.54% (-3) in 2025 and a couple of.48% (unch) in 2026. The five-year was at 2.42% (unch), the 10-year was at 2.68% (+2) and the 30-year was at 3.61% (+2) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was little modified: The one-year was at 2.57% (unch) in 2025 and a couple of.51% (unch) in 2026. The five-year was at 2.42% (unch), the 10-year was at 2.66% (unch) and the 30-year yield was at 3.56% (+1) at 3 p.m.
Bloomberg BVAL was little modified: 2.51% (unch) in 2025 and a couple of.46% (unch) in 2026. The five-year at 2.45% (unch), the 10-year at 2.68% (unch) and the 30-year at 3.59% (-1) at 3:30 p.m.
Treasuries were little modified.
The 2-year UST was yielding 3.870% (-3), the three-year was at 3.731% (+1), the five-year at 3.666% (+1), the 10-year at 3.843% (+1), the 20-year at 4.225% (+1) and the 30-year at 4.133% (+1) at 3:30 p.m.
Competitive:
North Hempstead, Recent York, is about to sell $100.858 million of GO bond anticipation notes at 10:30 a.m. eastern Thursday.