Bonds

Munis firmer, $1.8B Illinois GOs accelerated

Municipals were firmer in secondary trading as the primary market took focus, led by the accelerated pricing of $1.8 billion general obligation bonds from Illinois. U.S. Treasury yields fell out long and equities ended mixed.

The two-year muni-to-Treasury ratio Tuesday was at 64%, the three-year at 63%, the five-year at 61%, the 10-year at 60% 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 64%, the three-year at 63%, the five-year at 60%, the 10-year at 61% and the 30-year at 81% at 3:15 p.m.

While still early in the month, “things are looking positive following the third worst April for munis in three decades,” said Jason Wong, vice president of municipals at AmeriVet Securities.

Refinitiv MMD yields have fallen 12 to 20 basis points across the curve, leading munis to return 0.77% during the first four trading sessions of the month.

With investors’ worries subsiding following the Federal Reserve meeting and Fed Chair Jerome Powell’s insistence the next move will be a rate cut along with May historically being a favorable month for munis, with only four losing months in the past two decades, the market “could potentially see munis move back into positive territory for the year in the coming months,” Wong said.

Cooper Howard, a fixed-income strategist at Charles Schwab, concurred, saying positive returns can still happen in 2024.

April’s “poor performance” pushed munis further into negative territory, but “despite the poor start to the year, they may still end the year positive,” he said.

Since 1990, munis have posted negative returns during the first four months of the year seven times, according to Howard. However, five times they “recovered” and were able to post positive returns for the year, he noted.

Munis are rich relative to USTs, “a trend we expect will continue,” said Anders S. Persson, Nuveen’s chief investment officer for global fixed income, and Daniel J. Close, Nuveen’s head of municipals.

Munis should also remain “well bid,” following the entrance of $25 billion of reinvestment funds into the market that started on May 1.

This week, the new-issue calendar soared to $10 billion, led by $1.8 billion of GOs from Illinois.

“We would not be surprised if the deal is received well,” as the state is “a large, well-known name, and will offer some yield,” Howard said.

In the primary market Tuesday, Jefferies (A3/A-/A-/) accelerated a pricing for $1.8 billion GOs from Illinois.

Details for the first tranche, $250 million of Series of May 2024A, were not available as of 3:15 p.m.

The second tranche, $1.55 billion of Series 2024B, was preliminarily priced with 5s of 2/2025 at 3.66%, 5s of 2029 at 3.37%, 5s of 2034 at 3.40%, 5s of 2039 at 3.82%, 5.25s of 2044 at 4.20% and 5.25s of 2049 at 4.44%, callable 5/1/2034.

RBC Capital Markets held a one-day retail order for a slightly upsized $1.004 billion of the University of Chicago revenue bonds from the Illinois Finance Authority (Aa2/AA-/AA+/). The first tranche, $546.855 million of Series 2024A, saw 5s of 4/2031 at 3.07%, 5s of 2034 at 3.10%, 5s of 2040 at 3.62%, 5.25s of 4/2044 at 3.88%, 5.25s of 2049 at 4.10% and 4.25s of 2052 at 4.41%, callable 4/1/2034.

The second tranche, $456.77 million of Series 2024B, saw 5s of 4/2027 at 3.25%, 5s of 2029 at 3.10%, 5s of 2034 at 3.10% and 5.25s of 4/2039 at 3.54%, callable 4/1/2034.

J.P. Morgan priced for the Chandler Industrial Development Authority, Arizona, (A3/A-//) $437.885 million of AMT Intel Corp. Project industrial development revenue bonds, Series 2019, with 4s of 6/2049 with a mandatory put date of 6/1/2029 at par, callable 2/1/2029.

Jefferies priced for the San Diego Unified School District $251.490 million of GO refunding bonds. The first tranche, $15.345 million of Series R-7A (Aa2//AAA/AAA/), saw 5s of 7/2028 at 2.59%.

The second tranche, $50.355 million of Series SR-4A (Aa2//AAA/AAA/), saw 5s of 7/2031 at 2.49%, 5s of 2034 at 2.57% and 5s of 2039 at 3.10%, callable 7/1/2034.

The third tranche, $135.285 million of Series ZR-5A (Aa2//AAA/AAA/), saw 5s of 7/2028 at 2.59%, 5s of 2029 at 2.53%, 5s of 2034 at 2.57%, 5s of 2039 at 3.10%, 5s of 2044 at 3.57%, and 5s of 2047 at 3.71%, callable 7/1/2034.

The fourth tranche, $10.465 million of forward-delivery bonds, Series SR-4C (Aa2///), saw 5s of 7/2034 at 2.97%, noncall.

The fifth tranche, $40.040 million of forward-delivery bonds, Series ZR-5C (Aa2///), saw 5s of 7/2030 at 2.97%, 5s of 2034 at 2.97%, 5s of 2039 at 3.44% and 5s of 2040 at 3.58%, callable 7/1/2034.

Frost Bank priced for the Weslaco Independent School District, Texas, (/AAA/AAA/) $155.345 million of PSF-insured tax school building bonds, Series 2024, with 5s of 2/2025 at 3.44%, 5s of 2029 at 2.97%, 5s of 2034 at 3.01%, 5s of 2039 at 3.40%, 5s of 2044 at 3.79%, 4.125s of 2049 at 4.24% and 4.25s of 2054 at 4.33%, callable 2/15/2034.

Wells Fargo priced for the Hampton Roads Sanitation District, Virginia, (/AA+//) $117.73 million of wastewater revenue refunding bonds, Series 2024A, with 5s of 11/2024 at 3.42%, 5s of 2029 at 2.77%, 5s of 2034 at 2.88% and 5s of 2039 at 3.24%, callable 11/1/2034.

In the competitive market, the Florida Department of Transportation (Aa2/AA/AA/) sold $275 million of turnpike revenue bonds, Series 2024B, to Jefferies, with 6s of 7/2025 at 3.29%, 5s of 2029 at 2.82%, 5s of 2034 at 2.83%, 5s of 2039 at 3.25%, 4s of 2044 at 4.03%, 4s of 2048 at 4.11% and 4s of 2054 at 4.17%, callable 7/1/2034.

Augusta, Georgia, (Aa2/AA//) sold $250 million of taxable GOs, to Wells Fargo, with 6s of 10/2025 at 5.064%, 5.5s of 2029 at 4.60%, 4.84s of 2034 at par, 5.12s of 2039 at par and 5.5s of 2043 at 5.20%, callable 10/1/2032.

AAA scales
Refinitiv MMD’s scale was bumped three to six basis points: The one-year was at 3.25% (-4) and 3.07% (-4) in two years. The five-year was at 2.72% (-3), the 10-year at 2.69% (-4) and the 30-year at 3.77% (-6) at 3 p.m.

The ICE AAA yield curve was bumped four to six basis points: 3.26% (-6) in 2025 and 3.09% (-5) in 2026. The five-year was at 2.73% (-4), the 10-year was at 2.71% (-4) and the 30-year was at 3.76% (-5) at 3:15 p.m.

The S&P Global Market Intelligence municipal curve was bumped four to five basis points: The one-year was at 3.29% (-4) in 2025 and 3.06% (-4) in 2026. The five-year was at 2.69% (-4), the 10-year was at 2.68% (-4) and the 30-year yield was at 3.76% (-5), according to a 3 p.m. read.

Bloomberg BVAL was bumped four to five basis points: 3.31% (-5) in 2025 and 3.12% (-4) in 2026. The five-year at 2.66% (-4), the 10-year at 2.64% (-4) and the 30-year at 3.79% (-5) at 3:15 p.m.

Treasury yields fell out long.

The two-year UST was yielding 4.829% (+1), the three-year was at 4.641% (-1), the five-year at 4.474% (-1), the 10-year at 4.464% (-3), the 20-year at 4.705% (-4) and the 30-year at 4.608% (-4) at 3:30 p.m.

Primary to come:
Columbus, Ohio, (Aaa/AAA/AAA/) is set to price Thursday $467.455 million of various purpose GOs, consisting of $293.755 million of unlimited tax bonds, Series 2024A; $22.29 million of limited tax bonds, Series 2024B; $76.72 million of taxable unlimited tax bonds, Series 2024C; $15.385 million of taxable limited tax bonds, Series 2024D; and $59.305 million of unlimited tax refunding bonds, Series 2024-1. J.P. Morgan.

San Francisco (Aaa/AAA/AAA/) is set to price Thursday $345 million of GO refunding bonds, Series 2024-R1, serials 2025-2036. Stifel.

Energy Northwest (Aa1/AA-/AA/) is set to price Wednesday $266.460 million of electric station revenue bonds, consisting of $189.94 million of Project 1 refunding bonds, Series 2024-B, serials 2025-2027; $9.595 million of Columbia Generating Station bonds, Series 2024-B, serial 2031; and $66.925 million of Project 3 refunding bonds, Series 2024-B, serial 2028. Wells Fargo.

The New Jersey Health Care Facilities Financing Authority (A1/AA-//) is set to price Thursday $256.055 million of RWJ Barnabas Health refunding bonds, Series 2024B. Jefferies.

The Metropolitan Atlanta Rapid Transit Authority (/AAA//AAA/) is set to price Wednesday $222.16 million of green sales tax revenue bonds, consisting of $112.245 million of new-issue bonds, Series 2024A, and $109.915 million of refunding bonds, Series 2024B. Jefferies.

The Clifton Higher Education Finance Corp., Texas, (/AAA//) is set to price Wednesday $202.99 million of PSF-insured Idea Public Schools education revenue and refunding bonds, Series 2024, serials 2024-2044, terms 2049, 2054. Baird.

The Black Desert Public Infrastructure District, Utah, is set to price Wednesday $151.535 million of non-rated Black Desert Assessment Area #1 special assessment bonds, Series 2024. D.A. Davidson.

The Racine Unified School District, Wisconsin, is set to price Thursday $150 million of GO promissory notes, Series 2024. Baird.

The Garden Grove Public Financing Authority, California, (/AA//) is set to price Wednesday $140 million of lease revenue bonds, Series 2024A, serials 2025-2044, terms 2049, 2054. Stifel.

The Utah Housing Corp. (Aa2///) is set to price Thursday $114.805 million of taxable single family mortgage bonds, 2024 Series F. Jefferies.

Polk County, Iowa, (Aaa/AAA//) is set to price Wednesday $113.005 million of GO capital loan notes, Series 2024A. J.P. Morgan.

The Kentucky Asset/Liability Commission (/AA//) is set to price Wednesday $107.440 million of Federal Highway Trust Fund first refunding project notes, 2024 Series A. J.P. Morgan.

Competitive
Hempstead, New York, is set to sell $194.547 million of public improvement serial bond at 11 a.m. Wednesday.

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