Municipals were mixed, while U.S. Treasury yields rose and equity prices fell Friday after the White House announced tariffs against Mexico, Canada, and China will take effect Saturday.
For the week, municipals “not only moved in sync (with Treasuries) they actually outperformed, especially in the belly of the curve, with five-year and 10-year MMD-UST ratios dropping to 64-66%,” economists at Barclays said. “The long end has lagged a bit, and the yield curve has continued steepening. As a result, the five- to 10-year part of the yield curve has shown strongest results so far this year.”
January’s municipal bond supply “will end up being heavier compared with the normally slow start of the year, but the pipeline should remain quite robust,” Barclays said, while the 30-day visible supply “continues to look healthy. Ratios are quite low, and credit spreads remain very tight,” they said, adding, “pockets of value are hard to come by, aside from a handful of California credits, and also AMT credits, which continue to trade very wide versus non-AMT names.”
Barclays believes “tax-exempt ratios will continue trading in rather narrow ranges — 65-70% for 10-year and 81-87% for 30-year — at least for now. We would be more aggressive at the upper ends and more defensive at the lower ends. However, we would not be surprised if the next one to two months will be rather uneventful for the market, leaving investors with few attractive opportunities.”
As expected, the Federal Open Market Committee did not bring any surprises this week, as the central bank held the federal funds rate steady “and signaled that they are in a holding pattern, for now,” Barclays said, adding, it sees “the pause extending at least through March.” Overall, Barclays said the FOMC statement “was a bit more hawkish than expected, as new language was added acknowledging the solid labor market, while the phrase that inflation has made progress toward the Committee’s 2% objective was omitted.”
According to Barclays, Federal Reserve Chair Jerome Powell made clear at his press conference “the FOMC is in no rush to adjust the policy rate, and cuts will not resume until the committee is convinced that inflation progress has resumed or that the labor market has weakened.”
On Friday, the government reported personal consumption expenditures, or PCE, price index, the Fed’s preferred consumer inflation gauge, rose 0.3% on a monthly basis in December and at a 2.6% annual rate, in line with expectations. The core PCE, which excludes food and energy, rose 0.2% from November and 2.8% year-over-year.
“While today’s result does not completely upend the ongoing disinflationary trend, it is yet another month of data showing that inflation remains persistently above the Fed’s 2% target,” said Lauren Saidel-Baker, an economist at ITR Economics. “Price levels are being supported by a still-strong labor market, with wage inflation supporting the overall price rise. On a more fundamental level, elevated liquidity and other key leading indicators portend rising inflation by the latter half of the year.”
“Although the level of inflation will not likely exceed the highs of the most recent cycle, the resurgence of inflation this year will limit the Fed’s ability to continue the rate-cutting cycle far into 2025,” she said. “It is possible that we will even see rate hikes before the end of the year.”
AAA scales
MMD’s scale was unchanged: The one-year was at 2.65% and 2.67% in two years. The five-year was at 2.77%, the 10-year at 2.97% and the 30-year at 3.97% at 3 p.m.
The ICE AAA yield curve was mixed: 2.66% (-1) in 2026 and 2.66% (-1) in 2027. The five-year was at 2.75% (unch), the 10-year was at 2.98% (unch) and the 30-year was at 3.91% (+2) at 3 p.m.
The S&P Global Market Intelligence municipal curve was unchanged: The one-year was at 2.67% (-2) in 2025 and 2.69% (-2) in 2026. The five-year was at 2.76% (-2), the 10-year was at 2.98% (-2) and the 30-year yield was at 3.87% (unch) at 3 p.m.
Bloomberg BVAL was bumped one to two basis points: 2.63% (-2) in 2025 and 2.69% (-2) in 2026. The five-year at 2.80% (-2), the 10-year at 3.04% (-2) and the 30-year at 3.90% (-1) at 4 p.m.
Treasuries were weaker across the curve.
The two-year UST was yielding 4.234% (+4), the three-year was at 4.281% (+4), the five-year at 4.37% (+6), the 10-year at 4.479% (+7), the 20-year at 4.883% (+7) and the 30-year at 4.831% (+7) at 3:30 p.m.
The two-year municipal to UST ratio Friday was at 63%, the five-year at 64%, the 10-year at 65% 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 63%, the five-year at 63%, the 10-year at 66% and the 30-year at 82% at 3 p.m.
New-issue calendar
Issuance for next week is slated to fall to an estimated $5.151 billion, down from total sales of $7.087 billion this week. Next week’s calendar includes $3.959 billion of negotiated deals, down from a revised $5.379 billion that were sold this week. Bonds scheduled for competitive sale next week total $1.646 billion, compared with $1.708 billion this week. (Sources: Ipreo and The Bond Buyer for next week’s figures, LSEG for this week’s figures.)
Primary to come
The Florida Development Finance Corporation (NR/NR/NR/NR) leads the negotiated calendar with the remarketing of $985 million of Series 2025A revenue bonds for the Brightline Florida Passenger Rail Expansion Project. Term bonds due 2057. The issue is scheduled to be priced Thursday by Morgan Stanley & Co.
The Dallas Independent School District (Aaa/NR/NR/AAA) is set to price Thursday $612.265 million of Series 2025B unlimited tax school building and refunding bonds and $163.785 million Series 2025C unlimited tax refunding bonds. The Series B bonds consist of serial bonds due 2026-2045 and term bonds due in 2050 and 2055. The Series C bonds consist of serial bonds maturing 2026-2034. The bonds are insured by the Permanent School Fund Guarantee Program. Ramirez & Co.
The Lower Colorado River Authority, Texas (A1/A/A+/NR) is set to price Tuesday $544.8 million of Series 2025 transmission contract refunding revenue bonds for the LCRA Transmission Services Corporation Project. The issue includes serial bonds due 2026-2045 and term bonds due 2050 and 2055. BofA Securities.
Tarrant County Cultural Education Facilities Finance Corporation, Texas, (Aa2/AA/NR/NR) is set to price Thursday $370.54 million of fixed-rate hospital revenue bonds for the Cook Children’s Medical Center. J.P. Morgan Securities.
The North Carolina Housing Finance Agency is set to price Wednesday $299.0 million of home ownership revenue bonds, consisting of $91.765 million of Series 57A Non-AMT bonds due in 2056 and $207.235 million of Series 57B federally taxable bonds consisting of serial bonds due 2026-2036 and term bonds due 2040, 2045, 2050 and 2056. Wells Fargo Bank, N.A. Municipal Finance Group.
The Round Rock Independent School District, Texas, (Aaa/NR/NR/AAA) is slated to price Tuesday $232.61 million of Series 2025B unlimited tax school building bonds insured by the Permanent School Fund Guarantee Program. J.P. Morgan Securities.
The Riverside Community College District, California (Aa1/AA) is slated to sell Tuesday $205 million of Series 2025A Election of 2024 general obligation bonds. Piper Sandler & Co.
The Nebraska Investment Finance Authority (NR/AAA/NR/NR) is slated to sell Tuesday $174.525 million of single-family housing revenue bonds, consisting of $110 million 2025 Series A (Non-AMT) social bonds and $65 million of 2025 Series B (Taxable) bonds. J.P. Morgan Securities.
The Massachusetts Development Finance Agency (Aa1/AA+/NR/NR) is slated to sell Thursday $134.23 million of Series 2025 Smith College refunding revenue bonds due 2035 and 2045. Barclays Capital Inc.
The Kentucky Bond Development Corporation (A1/NR/A+/NR) is slated to sell Tuesday $130.22 million of Series 2025A City of Williamsburg hospital revenue bonds for the Baptist Healthcare System Obligated Group due in 2055. BofA Securities.
The California Public Finance Authority (NR/NR/NR/NR) is slated to sell $123.47 million of senior living rental housing revenue bonds, consisting of Series 2025A-1 senior lien bonds and Series 2025A-2 senior lien federally taxable bonds for Sunrise of Manhattan Beach. Goldman Sachs & Co.
The Alaska Housing Finance Corporation (Aaa/AA+/NR/NR) is slated to sell Tuesday $110 million of 2025 Series A general mortgage revenue bonds II, consisting of serial bonds due 2025-2037 and term bonds due in 2038, 2039, 2040, 2042, 2045, 2048, 2051, and 2054. Jefferies LLC.
Competitive
The Triborough Bridge & Tunnel Authority, New York, is slated to sell $500 million of bonds at 11:15 a.m., Eastern, Tuesday.
Waller County, Texas, is slated to sell $95.80 million of general obligation bonds at 10:30 a.m. Wednesday.
Westchester County, New York, is slated to sell $129.18 million of GO bonds at 11:00 a.m. Wednesday.
The Washington Suburban Sanitary District, Maryland (Aaa/AAA/AAA) is slated to sell $315.95 million of GO bonds at 10:15 a.m.