Munis were little modified within the last session of the month and few deals of size priced, while muni mutual funds saw inflows overall but high-yield saw the primary outflows since mid-April. U.S. Treasuries were mixed and equities saw losses.
“The ultimate session of October concludes what has been an upwardly trending curve all month because the correction brings attractive raw yields into play with momentum slanted toward buyers,” said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital, LLC.
The correction this month has translated into losses, with the Bloomberg Municipal Index within the red at -1.51% Thursday, which Olsan notes is the most important loss since October 2009 when it was down 2.09%.
“That pales compared to USTs,” she noted, which can end the month down 2.42% and U.S. corporate debt that’s more likely to close off 2.29%.
“Relative value will proceed to be a spotlight but has held wide enough — upper 60% range within the short end and 70% or higher past 10 years — in order not to discourage further commitments,” she said.
The 2-year municipal to UST ratio Thursday was at 65%, the three-year at 64%, the five-year at 65%, 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 66%, the three-year at 64%, the five-year at 65%, the 10-year at 71% and the 30-year at 84% at 3:30 p.m.
For buyers engaged this month, Olsan identified just how much improved taxable equivalent yields have turn into in October. She said the month’s “price path has created wider spreads but additionally brought higher yields which can be now within the range where a broader audience may begin to take notice.”
The short end of the curve has shifted right into a yield range that can “encourage defensive positioning,” she said. “A set one-year maturity in a single-A rated revenue bond is trading around 3.20%, a 30-basis-point adjustment from the tip of September,” she said, noting TEYs are within the mid-5% area, which is greater than 100 basis points over USTs.
A considerable correction within the intermediate range has moved AAA-rated 10-year bonds above 3.00%, Olsan said, pointing to Washington State’s most up-to-date 10-year GO yielded 3.24% for a TEY of 5.40%.
“Within the 20-year range where the curve begins to maximise itself, yields grow to around 3.75% in AA-rated bonds and are generating TEYs above 6.00%,” she said. An example: “a trade of Recent York City GOs 5s due 2046 (call 2034) at 3.97% was 30 basis points above trading within the bond from early October.”
In the first market Thursday, BofA Securities priced $188.895 million of Fircrest Properties sustainability lease revenue bonds for the state of Washington DSHS Project (/A//), with 5s of 6/2028 yielding 2.97%, 5s of 2029 at 3.03%, 5s of 2034 at 3.44%, 5s of 2039 at 3.76%, 5s of 244 at 4.13% and 5.5s of 2049 at 4.30%, callable 6/1/2034.
Within the competitive market, the Charleston County School District (MIG 1///) sold $115.065 million of general obligation bonds to BofA Securities, with 5s of three/2025 at 3.25%, non-call. South Carolina SD Credit Enhancement insured.
While October supply got here in at the very best levels for any month this yr at $56 billion-plus, issuance drops dramatically from here, with Bond Buyer 30-day visible supply at $3.77 billion, and few deals of size on the calendar next week as all eyes turn Tuesday’s election.
Fund flowsInflows continued this week as LSEG Lipper reported investors added $659 million to municipal bond mutual funds for the week ending Wednesday, in comparison with $514.9 million of inflows the prior week. This marks 19 straight weeks of inflows.
High-yield funds saw outflows of $64.4 million compared with inflows of $271.9 million the week prior.
Long-term funds saw $361 million of inflows, intermediate-term funds saw $301 million, recording the most important share of inflows, while short-term funds saw $26 million, noted J.P. Morgan’s Peter DeGroot. The week’s inflows were dominated by municipal exchange-traded funds at $625 million, he said, together with modest capital into open-end funds at $34 million.
DeGroot said the firm’s own observations “show even higher inflows right into a monthly-reporting ETF over the weekly period, so Lipper’s headline figure is probably going understated to a point.”
Money market funds, meanwhile, reported $2.518 billion of inflows in the newest reporting week, with total assets under management at $133.737 billion, in line with the Money Fund Report, a weekly publication of EPFR.
The typical seven-day easy yield for all tax-free and municipal money-market funds fell to three.12% from 3.28% the prior week.
The SIFMA Swap Index fell to three.24% Wednesday in comparison with the previous week’s 3.51%.
AAA scales
Refinitiv MMD’s scale was unchanged: The one-year was at 2.85% and a couple of.69% in two years. The five-year was at 2.68%, the 10-year at 3.01% and the 30-year at 3.87% at 3 p.m.
The ICE AAA yield curve was unchanged: 2.95% in 2025 and a couple of.71% in 2026. The five-year was at 2.69% , the 10-year was at 3.00% and the 30-year was at 3.79% (unch) at 4 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.90% in 2025 and a couple of.73% in 2026. The five-year was at 2.71%, the 10-year was at 3.01% and the 30-year yield was at 3.80% at 4 p.m.
Bloomberg BVAL was unchanged: 2.86% (unch) in 2025 and a couple of.67% (unch) in 2026. The five-year at 2.71% (unch), the 10-year at 3.02% (unch) and the 30-year at 3.81% (-1) at 4 p.m.
Treasuries were mixed.
The 2-year UST was yielding 4.162% (+1), the three-year was at 4.125 (+1), the five-year at 4.146% (+2), the 10-year at 4.28% (+2), the 20-year at 4.599% (-1) and the 30-year at 4.476% (flat) on the close.