Municipals were weaker for the third consecutive trading session amid a heavy new-issue calendar, while U.S. Treasury yields fell slightly and equities ended mixed.
Several large new-issues priced into a weaker market, including San Francisco International Airport, Jacksonville Electric Authority water and sewer bonds, Miami-Dade County School Board, Dallas Independent School District in the negotiated market while San Francisco sold taxable bonds in the competitive market. The Los Angeles Department of Water and Power remained on the day-to-day calendar amid the devastating wildfires.
Triple-A muni curves saw yields rise by up to four basis points while govies made small gains across the curve.
The two-year municipal to UST ratio Tuesday was at 66%, the five-year at 65%, the 10-year at 68% and the 30-year at 83%, according to Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 66%, the five-year at 64%, the 10-year at 67% and the 30-year at 81% at 4 p.m.
The larger supply picture is weighing on the market as the pressure on the secondary continued Tuesday. Bond Buyer 30-day visible supply sits at $13.27 billion.
“Even though it will be priced to sell, such large supply in one week may be a struggle for the asset class,” said Anders S. Persson, Nuveen’s chief investment officer for global fixed income, and Daniel J. Close, Nuveen’s head of municipals.
Issuance is set to rise as “borrowers catch up on delayed projects and refinancings, worry about the tax exemption’s future, and begin to grapple with sizeable infrastructure needs,” said Matt Fabian, a partner at Municipal Market Analytics.
Fabian noted the “MMA Price Index, which had turned briefly positive on start-of-year enthusiasm, dropped to negative again on 1/8 and has done more poorly since, implying more losses ahead.”
“That this came despite: 1) highly favorable Jan/Feb reinvestment expectations, the first mutual fund inflow in weeks, and 3) an apparent resumption of [separately managed account] buying, highlights industry pricing trepidation over evident supply challenges (the current 30-day supply calendar is an outsize $16.5 billion and the compelling move to cheaper UST levels,” he said.
The Treasury market will remain “range bound” in 2025, Persson and Close said, noting that munis, primarily priced based on government yields, should also be range bound.
However, there may be “periods of choppiness” when new-issue supply outstrips demand, they said.
“Two silver linings support the muni scenario: Higher yields should attract more investors, and 2025 should see reinvestment income of almost $350 billion, which is typically reinvested into munis,” Persson and Close said.
California wildfires
The market will expect more negative headlines for Los Angeles-area credits due to the raging wildfires, Fabian said.
With so much California paper having traded through AAA scales over the past year, the price downside may be outsized, even if only short-term, he said. Block trading of Los Angeles Department of Water and Power 5s of 2048 traded at 4.36%-4.38% versus a range of 4.26%-4.41% Monday. LA DWP 5s of 2029 traded at 3.41%, 5s of 2030 at 3.27%, 5s of 38 at 3.75%, and 5s of 2039 at 3.81% Tuesday.
California bond prices have struggled amid the Los Angeles wildfires, and “this may not yet be a time to buy, the fires still out of control and the potential for at least temporary payment defaults still elevated,” Fabian said.
“However, the specific areas being burned are among the most resilient in America, at least from a tax base perspective,” he noted.
The combination of insurance proceeds and federal and state rebuilding assistance are likely to be insufficient overall to replace what has been lost, Fabian said.
And, in the long-term, “even-more-expensive property insurance and reasonably higher state taxes will negatively capitalize into home values,” he said.
But it is inappropriate to liquidate impacted CUSIPs: “assuming that homeowners without the resources to rebuild will sell their properties to new people who do, related Proposition 13 assessed value jumps may offset a material portion of both immediate- and long-term property value declines and, more importantly to municipal tax-backed investors, ease the incremental burden on local and city-wide tax levies,” Fabian said.
Primary market details
Ramirez priced for the Airport Commission of the city and county of San Francisco (A1/AA-/A+/) $984.265 million of San Francisco International Airport second series revenue bonds. The first tranche, $863.1 million of Series A AMT bonds, saw 5s of 5/2029 at 3.74%, 5s of 2030 at 3.79%, 5s of 2035 at 4.11%, 5.25s of 2055 at 4.77% and 5.5s of 2055 at 4.72%, callable 5/1/12035.
The second tranche, $104 million of Series B non-AMT/governmental purposes revenue bonds, saw 5s of 5/2036 at 3.25% and 5s of 2053 at 4.24%, callable 5/1/2035.
The third tranche, $17.165 million of Series C taxables, saw 4.45s of 11/2025 at par, noncall.
BofA Securities priced for the Jacksonville Electric Authority (Aa1/AA+/AA+/) $532.42 million of water and sewer system revenue bonds, Series A, with 5s of 10/2025 at 2.81%, 5s of 2030 at 3.12%, 5s of 2035 at 3.44%, 5s of 2040 at 3.78%, 5s of 2045 at 4.17%, 5s of 2050 at 4.40% and 5.25s of 2055 at 4.43%, callable 4/1/2035.
BofA Securities priced for the Miami-Dade County School Board, Florida, (A1///) $409.41 million of certificates of participation, Series 2025A, with 5s of 5/2026 at 3.12%, 5s of 2030 at 3.35% and 5s of 2032 at 3.41%, noncall.
Loop Capital Markets priced for the Dallas Independent School District, Texas, (Aaa///) is set to price Tuesday $339.54 million of PSF-insured multi-modal unlimited tax school building bonds, with 5s of 2/2055 with a mandatory put date of 2/15/2026 at 3.25%, noncall.
Goldman Sachs priced for the Pennsylvania Higher Educational Facilities Authority (Aa1/AA+//) $285.365 million of the Trustees of the University of Pennsylvania revenue bonds, Series A, with 5s of 2/2035 at 3.36%, 5s of 2055 at 4.31% and 4.25s of 2055 at 4.52%, callable 2/15/2035.
Jefferies priced for the Texas Department of Housing and Community Affairs (Aaa/AA+//) is set to price Tuesday $175 million of residential mortgage revenue and refunding non-AMT bonds, Series 2025A, with all bonds pricing at par — 3.2s of 1/2026, 3.55s of 1/2030, 3.65s of 7/2030, 4s of 1/2035, 4s of 7/2035, 4.25s of 1/2040 and 4.65s of 1/2045 — except for 5s of 1/2050 at 4.80%, 5.125s of 7/2055 and 5.75s of 1/2056 at 4.10%, callable 7/1/2033.
In the competitive market, San Francisco sold $233.02 million of taxable GOs, Bid Group A, to BofA Securities, with 5s of 6/2044 at 3.82% and 5s of 2045 at 3.87%, callable 6/15/2033.
The issuer also sold $22.775 million of taxable GOs, Series 2025A, Bid Group B, to BofA Securities, with 4.52s of 6/2025 at par and 5s of 2030 at 4.85%, noncall.
Additionally, the issuer sold $82.165 million of taxable GOs, Series 2025A-2, to BofA Securities, with 5.25s of 6/2031 at 4.95%, 5.25s of 2035 at par, 5.51s of 2040 at par and 5.25s of 2044 at par, callable 6/15/2034.
San Francisco sold $67.19 million of taxable GOs, Series 2025C, Bid Group B, to BofA Securities, with 5s of 6/2025 at 4.52%, noncall.
The issuer sold $63.99 million of taxable GOs, Series 2025D, to BofA Securities, with 5s of 6/2031 at 4.95%, 5.25s of 2035 at par, 5.51s of 2040 at par and 5.77s of 2045 at par, callable 6/15/2034.
AAA scales
MMD’s scale was cut up to four basis points: The one-year was at 2.86% (unch) and 2.89% (unch) in two years. The five-year was at 2.99% (unch), the 10-year at 3.24% (+2) and the 30-year at 4.11% (unch) at 3 p.m.
The ICE AAA yield curve was cut two to four basis points: 2.87% (+4) in 2026 and 2.91% (+2) in 2027. The five-year was at 2.98% (+3), the 10-year was at 3.21% (+4) and the 30-year was at 4.04% (+3) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.89% (-2) in 2025 and 2.90% (-2) in 2026. The five-year was at 2.96% (unch), the 10-year was at 3.16% (unch) and the 30-year yield was at 4.02% (unch) at 4 p.m.
Bloomberg BVAL was cut one to two basis points three years and out: 2.82% (-2) in 2025 and 2.88% (unch) in 2026. The five-year at 3.02% (+2), the 10-year at 3.28% (+2) and the 30-year at 4.10% (+2) at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 4.365% (-4), the three-year was at 4.467% (-3), the five-year at 4.592% (-3), the 10-year at 4.788% (-2), the 20-year at 5.056% (-1) and the 30-year at 4.972% (-2) at the close.
Primary to come
The Triborough Bridge and Tunnel Authority (A1/A+//AA/) is set to price Thursday
The Orlando Health Obligated Group (/A+/AA-/) is set to price Thursday $1.225 billion of hospital revenue bonds: $824.77 million of Series A bonds through the Orlando County Health Facilities and $400 million of Series B taxable corporate CUSIPs through the health obligated group.
The Plano Independent School District, Texas, (Aaa/AAA//) is set to price Thursday $607.3 million of PSF-insured unlimited tax school building bonds, serials 2026-2045. RBC Capital Markets.
The Idaho State Building Authority (Aaa//AA+/) is set to price Thursday $310.59 million of school modernization facilities fund sales tax revenue education bonds. J.P. Morgan Securities.
The Regents of the University of Colorado (Aa1//AA+/) is set to price Thursday $300 million of Series 2025A university enterprise revenue bonds and Series 2025B refunding university enterprise revenue bonds. Wells Fargo.
The Trustees of Purdue University (Aaa/AAA//) is set to price Wednesday $200 million of Purdue University student facilities system revenue refunding bonds, Series A. RBC Capital Markets.
The Iowa Finance Authority (/AAA/AAA/) is set to price Wednesday $186.845 million of state revolving fund tax-exempt and taxable green revenue bonds, consisting of $146.715 million of tax-exempt green bonds, serials 2033-2044, terms 2049, 2054, and $40.13 million of taxables, serials 2027-2033. BofA Securities.
The city of
Alaska (Aa3///) is set to price Wednesday $120.29 million of international airport systems revenue refunding, consisting of $61.395 of Series 2025A bonds, serials 2026-2035; and $58.895 million of Series 2025B forward delivery bonds, serials 2026-2035. Goldman Sachs.
The Sunnyvale Independent School District, Texas, (/AAA//) is set to price Wednesday $101.115 million of PSF-insured unlimited tax building and refunding bonds. Piper Sandler.
Competitive:
The Board of Regents of Iowa is set to sell $252 million of University of Iowa Healthcare hospital system revenue bonds at 11 a.m. eastern Wednesday.