Municipalities rallied together Thursday as the Triborough Bridge and Tunnel Authority doubled its deal size to $1.6 billion, while muni mutual funds saw inflows reach nearly $1.5 billion. billion dollars. U.S. Treasury yields fell and stocks improved.
Muni yields rose two to 12 basis points, depending on the curve, while U.S. dollar yields fell six to 12 basis points. Transactions on the primary market experienced significant price variations.
LSEG Lipper reported Thursday that investors added $1.476 billion to municipal bond mutual funds for the week ending Wednesday, following inflows of $210.6 million the week before. The last time entries topped $1 billion was over a year ago, during the week ending January 18.
The high yield sector also saw inflows of $626 million, following inflows of $179 million the previous week.
“The Fed’s fury at the end of the month generated strong bidding across all maturities and credit sectors on rate forecasts,” said Kim Olsan, senior vice president of municipal bond trading at FHN Financial.
Munis has embarked on a “yield-holding now while you can trade with large gains shown across most of the curve,” she said.
Although the market “hasn’t quite recovered 100% of the yield losses from early January,” Olsan said the last two sessions have closed about half of the gap.
The main muni index posted losses of 0.51%, well below the 2.8% gain recorded in January 2023, she said.
“Munis underperformed the US Treasury Index, which returned -0.3%,” said Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel.
On a duration-matching basis, they noted that “munis have underperformed Treasuries in the short and medium term, and slightly outperformed in the long term.”
“Short-term maturities recorded the best result, ending almost unchanged from the December close,” with allocations benefiting “from favorable rates – the one-year MMD average during the month was 2.89% and weekly floaters were trading at a weekly average of 3.30%,” Olsan said.
While interim ratios remained between 60 and 65 percent, with yields below 2.50 percent, Olsan said “performance was held back by a 50 basis point loss.”
“Long-term bonds fell 0.8% during the month with a 30-year MMD spot trading range of 3.43% to 3.61%,” she said.
The five- and 10-year MMD-UST ratios were one percentage point cheaper month-over-month, while the 30-year ratio was two percentage points richer in January, according to strategists at Barclays.
The two-year muni/Treasury ratio was Thursday at 61%, three-year ratio at 61%, five-year ratio at 60%, 10-year ratio at 59% and 30-year ratio at 83%, according to Reading 15 p.m. EST from Refinitiv Municipal Market Data. ICE Data Services had the two-year at 62%, the three-year at 61%, the five-year at 60%, the 10-year at 59% and the 30-year at 81% as of 3:30 p.m.
Meanwhile, GO bonds and income bonds “performed on par, matching the overall market loss,” with the latter outperforming on a spread trade last year, according to Olsan.
“The GO bond index returned -0.6% in January and slightly underperformed the income bond index, which posted -0.5% in terms of total return,” Barclays strategists said .
Water/sewer, transportation and health care will be minimally affected by January’s volatility, she said.
Taxables posted a nominal loss, “marginally outperforming U.S. and corporate bond results by 10 to 20 basis points,” she said.
Taxable emissions for January were $1.1 billion, down 66.8% from 2023, according to LSEG Refinitiv data.
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Repayments in January totaled $2.4 billion, down 57.8% year over year, according to LSEG Refinitiv data.
High-yield munis “tracked the main tax-exempt index with a 0.4% loss,” she said.
“Good performances in the water and sewerage, transport and electricity sectors were offset by negative performances in the tobacco, education, health and special taxes sectors,” they said. said Barclays strategists.
Excluding Puerto Rico credits, they noted that the index had negative total returns of 0.6%.
“The Buckeye OH Tobacco 5 Sector Indicator due 2055 reached a high yield of 5.68% during the month, but ended with an intra-month low of 5.36%,” a Olsan said.
January high-yield muni ETF flows saw outflows of $15 million and outflows from the 12-month cycle are $53 million, according to Bloomberg data.
In the primary market on Thursday, Goldman Sachs assessed and re-priced for institutions an increased amount of $1.659 billion of TBTA Capital Lockbox – City Sales Tax Bonds, Series 2024A, of the Triborough Bridge and Tunnel Authority (/AA+/AAA/), with yields up 12 to 20 basis points from Wednesday’s retail offering: The first tranche, $1.502 billion Series 2024A-1, saw 5s from 5/2027 at 2.46% (-17), 5s from 2029 at 2.34% (-17), 5s from 2029 at 2.34% (-17), 2034 at 2.50% (-15) , 5s from 2039 at 2.99% (-20), 5s from 2044 at 3.43% (-14), 5s from 2049 at 3.69% (-17), 4s from 2054 at 4.10%, 5s from 2054 to 3.82% (-15), 5.25s from 2059 to 3.88% (-13), 4.25s from 2064 to 4.28% (-12) and 5.25s from 2064 to 3, 99% (-12), callable on 05/15/2034.
The second tranche, $102.850 million Series 2024A-2, saw 5.25 seconds of 5/2059 at 3.88% (-13) and 5.25 seconds of 2064 at 3.99% (-12) , refundable on 05/15/2033.
Piper Sandler has appraised and revalued for the Alvin Independent School District, Texas (Aaa//AAA/) $99.145 million of PSF Insured Unlimited Tax Reimbursement School Bonds, Series 2024, with increased yields up to 12 basis points: 5s on 2/2025 at 2.97% (-9), 5s from 2029 at 2.48% (-9), 5s from 2034 at 2.65% (unch), 5s of 2039 at 3.16% (-3), 5s of 2044 at 3.45% (-10) and 4s of 2051 at 4.05% (-12), callable on 02/15/2033.
Secondary trading
Washington 5s from 2025 at 2.91% against 2.99% on Wednesday. 2026 Virginia 5s at 2.58%-2.53%. California 5s of 2026 at 2.54%-2.52% against 2.70%-2.68% on Tuesday.
Connecticut 5 of 2028 at 2.40%. California 5s of 2029 at 2.31%-2.30% against 2.47%-2.46% on Tuesday. NYC 5 from 2030 to 2.42%-2.41%.
Florida BOE 5s of 2034 at 2.42%-2.39%. University of California 5s of 2035 at 2.40%-2.38% compared to 2.39%-2.38% on Wednesday and 2.49%-2.48% on Tuesday. Washington 5s of 2036 at 2.60% against 2.75%-2.74% Wednesday and 2.87%-2.78% original on 01/24.
Massachusetts 5s of 2049 at 3.67%-3.61% compared to 3.86%-3.88% on Monday and 3.89%-3.94% on 01/23. Triborough Bridge and Tunnel Authority 5s of 2051 at 3.64%-3.63% compared to 3.80% Wednesday and 3.85% Tuesday. Battery Park City Authority 5s of 2053 at 3.56%-3.55% compared to 3.76% as of 01/19.
AAA scales
The Refinitiv MMD scale saw significant increases: the one-year rate was 2.84% (-7, -1 bps in February) and 2.56% (-8, no rollover in February) over two years. The 5 year was at 2.26% (-10, no roll in February), the 10 year at 2.28% (-10, no roll in February) and the 30 year at 3.42% (-10 ) at 15h.
The ICE AAA yield curve was increased by two to eight basis points: 2.84% (-2) in 2025 and 2.61% (-8) in 2026. The 5-year was at 2.33% (- 8), the 10 year was at 2.33% (-7) and the 30 year was at 3.40% (-7) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was increased by 11 to 12 basis points: the one-year rate was 2.80% (-12) in 2025 and 2.58% (-12) in 2026. The rate over five years was at 2.27% (-11). ), the 10-year yield was at 2.28% (-11) and the 30-year yield was at 3.40% (-11), based on a 3 p.m. reading.
Bloomberg BVAL was increased by seven to nine basis points: 2.79% (-7) in 2025 and 2.64% (-7) in 2026. The 5-year at 2.29% (-8), the 10 years at 2.36% (-8). ) and the 30 year at 3.47% (-9) at 3:30 p.m.
Treasuries were stronger.
The two-year UST yielded 4.197% (-6), the three-year at 3.967% (-8), the five-year at 3.800% (-10), the 10-year at 3861% (-11). , the 20 year at 4.203% (-12) and the 30 year yielded 4.102% (-12) at 3:45 p.m.