Municipals extended their weakness Friday but with smaller cuts than the prior day, as short-term U.S. Treasury yields fell and equities ended mixed.
The two-year muni-UST ratio Friday was at 63%, the five-year at 66%, the 10-year at 76% and the 30-year at 95%, according to Municipal Market Data's 3 p.m. ET read. ICE Data Services had the two-year at 62%, the five-year at 65%, the 10-year at 74% and the 30-year at 94% at a 3:30 p.m. read.
The week was a long-awaited reckoning with record supply, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.
"Prodded by stale positions and longer USTs under pressure, most ranges found adjusted prices coming into play," she said. "Yields in the 5-10 year range are up 5-10 basis points in the last week, but longer tenors are the victims of a bear steepener."
The 5% barrier was broken, Olsan said, pointing to a series of large deals bought at yields just above 5%.
Previously, when long-end yields breached that threshold, "new buyers emerged, and yields quickly declined thereafter," according to Grace Cen, Mikhail Foux, and Francisco San Emeterio of Barclays.
"In our view, history will repeat itself, and investors should be adding exposure, although near-term the market might remain choppy," they said.
"Other metrics are pointing to near-term pressure," according to Olsan, including growing secondary offerings, rising bids wanteds, and waning fund demand, including four consecutive sessions of outflows from ETFs.
Going forward, the "recalibration" of long absolute yields and spreads could encourage investors focused on taxables to cross over to munis, Olsan said, with some "high-grade options surpassing corporate bond equivalents."
"Generic AA-rated 5% bonds due 20 years or longer can be bought around 5.10%, for a TEY near 6.50%," she said. As the market contends with about $10.8 billion of supply next week, there will be "multi-year opportunities along a good part of the curve."
Volume for the week of July 21 is estimated at $10.8 billion, with $8.7 billion scheduled for negotiated and $2.1 billion scheduled for competitive sale.
Yields are also "plunging in bull steepening fashion after Federal Reserve Gov. Christopher Waller voiced support for an imminent central bank interest rate cut this month," according to José Torres, senior economist at Interactive Brokers.
Waller noted hiring has been dominated by non-cyclical sectors, "making employment conditions look better than they really are," Torres said. Waller also argued that tariff pressures are temporary and "inflation expectations are contained," according to Torres.
Arguments for a cut could be further bolstered by new data released this week, Torres said, pointing to consumer optimism and spending, as well as reports on building permits and housing starts.
AAA scales
MMD's scale was cut up to two basis points: The one-year was at 2.46% (unch) and 2.46% (unch) in two years. The five-year was at 2.60% (+2), the 10-year at 3.35% (+2) and the 30-year at 4.77% (+2) at 3 p.m.
The ICE AAA yield curve saw cuts up to three basis points: 2.46% (unch) in 2026 and 2.42% (unch) in 2027. The five-year was at 2.62% (+1), the 10-year was at 3.30% (+2) and the 30-year was at 4.70% (+3) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was cut up to two basis points: The one-year was at 2.46% (unch) in 2025 and 2.47% (unch) in 2026. The five-year was at 2.56% (+2), the 10-year was at 3.36% (+2) and the 30-year yield was at 4.76% (+2) at 3 p.m.
Bloomberg BVAL saw was cut up to five basis points: 2.46% (unch) in 2025 and 2.48% (unch) in 2026. The five-year at 2.59% (+1), the 10-year at 3.34% (+2) and the 30-year at 4.75% (+1) at 3:30 p.m.
Treasuries were firmer on the front of the curve.
The two-year UST was yielding 3.876% (-3), the three-year was at 3.843% (-3), the five-year at 3.958% (-3), the 10-year at 4.428% (-3), the 20-year at 5.006% (-1) and the 30-year at 4.999% (-1) just before the close.
Primary to come
The New York City Transitional Finance Authority (Aa1/AAA/AAA/) is set to price Wednesday $1.5 billion of future tax secured tax-exempt subordinate bonds, Fiscal 2026 Series A, Subseries A-1. Ramirez.
The Tarrant County Cultural Education Facilities Finance Corp. (Aa2/AA//) is set to price Thursday $703.465 million of Texas Health Resources System revenue bonds. Morgan Stanley.
The Snohomish County Public Utility District, Washington, (Aa2/AA/AA/) is set to price Thursday $387.545 million of electric system revenue and refunding bonds. Raymond James.
The Peace River Manasota Regional Water Supply Authority, Florida, (/AA/AA/) is set to price Tuesday $369.71 million of new-issue and refunding utility system revenue bonds. Raymond James.
The Illinois Housing Development Authority (Aaa///) is set to price Thursday $350 million of social revenue bonds. RBC Capital Markets.
The Idaho Housing and Finance Association (Aa1///) is set to price Tuesday $325 million of non-AMT and taxable single family mortgage bonds. RBC Capital Markets.
The Spring Branch Independent School District, Texas, is set to price Thursday $323.92 million of unlimited tax school building and refunding bonds. Piper Sandler.
The Trustees of Dartmouth College (Aa1/AAA//) is set to price Monday $300 million of taxable bonds. Goldman Sachs.
The Guam Waterworks Authority (Baa2/A-//) is set to price Tuesday $267.075 million of water and wastewater system revenue bonds. RBC Capital Markets.
The Sherman Independent School District, Texas, (Aaa/AAA//) is set to price Wednesday $226.29 million of PSF-insured unlimited tax school building bonds. Raymond James.
The District of Columbia Water and Sewer Authority (Aa2/AA+/AA/) is set to price Tuesday $216.335 million of public utility subordinate lien revenue and revenue refunding bonds. Siebert Williams Shank.
The Forney Independent School District, Texas, (/AAA//) is set to price Tuesday $204.725 million of PSF-insured unlimited tax school building and refunding bond. FHN Financial.
The Florida Local Government Finance Commission is set to price Tuesday $202.595 million of senior living revenue bonds (The Convivial Jacaranda Trace Project). Ziegler.
The Florida Local Government Finance Commission (Ba1///) is set to price Thursday $201.29 million of educational facilities revenue bonds (Bridgeprep Academy Projects). HJ Sims.
The Cobb-Marietta Coliseum and Exhibit Hall Authority (Aa2/AA-//) is set to price Tuesday $188.92 million of revenue bonds (Cobb Galleria Centre Project). BofA Securities.
The Oklahoma Water Resources Board (/AAA/AAA/) is set to price Tuesday $175 million of Revolving Fund revenue bonds - Clean Water Program. Raymond James.
The San Bernardino Community College District, California, (Aa1/AA//) is set to price Tuesday $165.823 million of GOs. Piper Sandler.
The Nash Health Care Systems (/BBB+/A-/) is set to price Tuesday $154.06 million of health care facilities revenue bonds. Wells Fargo.
The Maine Governmental Facilities Authority (Aa2/AA-//) is set to price Tuesday $150 million of lease rental revenue bonds. BofA Securities.
The Southwestern Community College District, California, (Aa2///) is set to price Tuesday $120 million of GOs. Raymond James.
The East Allen Multi School Building Corp. (/AA+//) is set to price Wednesday $120 million of ad valorem property tax first mortgage bonds. Stifel.
The Sierra Vista Industrial Development Authority is set to price Tuesday $110.215 million of nonrated education facility revenue bonds (Wake Preparatory Academy). Baird.
The Alvin Independent School District, Texas, (Aaa//AAA/) is set to price Wednesday $103.16 million of PSF-insured unlimited tax schoolhouse bonds.
The San Mateo-Foster City School District, California, (Aaa///) is set to price Thursday $100 million of GOs. Stifel.
Competitive
Maui County, Hawaii, is set to sell $301.81 million of GOs at 11:30 a.m. Eastern Wednesday.
Denton, Texas, is set to sell $234.265 million of certificates of obligation at 10:45 a.m. Wednesday.
The Freehold Township Board of Education, New Jersey, is set to sell $135.468 million of school bonds at 11 a.m. Thursday.
Jessica Lerner contributed to this story.
