On the heels of President Joe Biden’s departure from the presidential race, munis were mixed Monday. U.S. Treasuries gave back some early gains, ending the day slightly weaker, while equities ended up.
The two-year muni-to-Treasury ratio Monday was at 63%, the three-year at 65%, the five-year at 66%, the 10-year at 65% 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 65%, the five-year at 66%, the 10-year at 66% and the 30-year at 82% at 3:30 p.m.
The initial reaction was a little bit a flight-to-quality trade in rates, which is supportive of USTs and munis as safe-haven assets do well during times of uncertainty, said Chris Brigati, senior vice president and director of strategic planning and fixed income research at SWBC.
However, volatility is expected to continue until Democrats formally announce Biden’s replacement, he noted.
As Vice President Kamala Harris “awaits formal endorsement by the Democrats, potential changes in direction could further impact market volatility,” Brigati said.
If her candidacy is confirmed, the market “will adjust to reduced uncertainty,” though volatility may continue ahead of the presidential election, he said.
Prior to Biden’s decision to give up his reelection bid, BofA strategists noted in a report Friday that volatility over the past nine elections “tended to be range-bound, even in the periods immediately before and after Election Day.”
Spikes happened in both 2008 and 2020, mostly due to the economy rather than elections, they noted.
However, volatility has been “more significant” in the last five general election years than the previous four, likely because AAA rates were “lower in 2004 and onward than in previous general election years,” BofA strategists said.
Tom Kozlik, managing director and head of public policy and municipal strategy at HilltopSecurities, argued the recent shakeup will not create that much volatility in the market, even as questions surround who will succeed Biden as the Democratic presidential nominee.
Harris is the frontrunner, but the matter may not be decided for several weeks, he noted.
While it seems like the Democrats might gain some momentum following Biden’s decision, the overall market reaction is likely to be greater certainty that Republicans will take the White House, if not an outright red wave, Kozlik noted.
Biden’s departure reinforces that he was polling behind Trump and the Democrats are attempting to find a way to ensure they have a “better chance” at the White House and keeping the Senate, he said.
Many expected Biden to give up his reelection bid at some point.
“We have to consider what the dynamics will look like under a Republican presidency with Donald Trump,” said Jeff Lipton, a research analyst and market strategist.
There will also be focus on any potential Republican attempt to “erode or eliminate” the muni tax exemption, such as additional tax cuts, particularly on the corporate side, he said.
It’s also unclear if there will be any attempts to roll back any of the Biden infrastructure initiatives, which could reveal credit and muni volume implications, according to Lipton.
Trump has vocalized “loosening up” regulations and further tax cuts, he said.
Additionally, some elements of the 2017 Tax Cuts and Jobs Act will be “sunsetting,” and it’s unclear if they will be extended, Lipton noted.
AAA scales
Refinitiv MMD’s scale was little changed: The one-year was at 2.88% (unch) and 2.85% (-1) in two years. The five-year was at 2.75% (-2), the 10-year at 2.78% (unch) and the 30-year at 3.66% (unch) at 3 p.m.
The ICE AAA yield curve was cut up to two basis points: 2.90% (+1) in 2025 and 2.88% (unch) in 2026. The five-year was at 2.77% (unch), the 10-year was at 2.80% (+1) and the 30-year was at 3.66% (+2) at 3:30 p.m.
The S&P Global Market Intelligence municipal curve was mixed: The one-year was at 2.92% (-3) in 2025 and 2.89% (-3) in 2026. The five-year was at 2.78% (unch), the 10-year was at 2.80% (+2) and the 30-year yield was at 3.64% (+1) at 3 p.m.
Bloomberg BVAL was unchanged: 2.94% in 2025 and 2.88% in 2026. The five-year at 2.80%, the 10-year at 2.78% and the 30-year at 3.67% at 3:30 p.m.
Treasuries were slightly weaker.
The two-year UST was yielding 4.520% (+1), the three-year was at 4.294% (+1), the five-year at 4.176% (+1), the 10-year at 4.255% (+2), the 20-year at 4.575% (+2) and the 30-year at 4.475% (+2) at 3:30 p.m.
Primary to come
The Texas Transportation Commission is set to price Tuesday $1.44 billion of Central Texas Turnpike System revenue refunding bonds, consisting of $406.024 million of first-tier bonds, Series 2024-A ((A2/A/A+/), serials 2032, 2035-2038; and $1.034 billion of second-tier bonds, Series 24-C (A3/A-/A-/), serials 2027, 2030-2042. Wells Fargo.
The commission (A2/A/A+/) is also set to price Tuesday $225 million of Central Texas Turnpike System first-tier revenue refunding put bonds, Series 2024B. Morgan Stanley.
The South Carolina Public Service Authority (A3/A-/A-/) is set to price Tuesday $900 million of revenue obligation bonds, consisting of $180 million of tax-exempt improvement bonds, Series 2024 A; $670 million of tax-exempt refunding bonds, Series 2024B; and $50 million of taxable improvement bonds, Series 2024C. J.P. Morgan.
The Minneapolis-St. Paul Metropolitan Airports Commission (/A+/A+/) is set to price Wednesday $693.8 million of subordinate airport revenue bonds, consisting of $208.23 million of governmental/non-AMT bonds, Series 2024A, term 2054; and $485.66 million of private activity/AMT bonds, serials 2026-2044, term 2049. Wells Fargo.
The Black Belt Energy Gas District is set to price $600 million of gas project revenue bonds, 2024 Series C. Goldman Sachs.
The Pennsylvania Housing Finance Agency (Aa1/AA+//) is set to price Wednesday $491.115 million of single-family mortgage revenue bonds, consisting of $339.3 million on non-AMT social bonds, Series 2024-146A, serials 2034-2036, terms 2039, 2044, 2049, 2053, 2054; $75.69 million of taxables, Series 2024-146B, serials 2025-2034, terms 2039,2043; and $80.125 million of taxables, Series 2024-146C, serials 2025-2034, terms 2039, 2044, 2049, 2053, 2054 BofA Securities.
King County, Washington, (Aa1/AA+//) is set to price Wednesday $300 million of sewer revenue refunding bonds, 2024 Series A. BofA Securities.
The San Diego Public Facilities Financing Authority (/AA/AA/) is set to price Tuesday $270.69 million of subordinated sewer revenue bonds, Series 2024A, serials 2025-2044, terms 2049, 2054. Siebert Williams Shank.
The National Finance Authority, New Hampshire, (A2///) is set to price Wednesday $266.112 million of social municipal certificates, Series 2024-3, Class A, serial 2041. Wells Fargo.
The Hampton Roads Sanitation District, Virginia, (Aa1/AA+//) is set to price Tuesday $244.635 million of wastewater revenue bonds, Series 2024B, serials 2039-2049, term 2054. BofA Securities.
The Longview Independent School District, Texas, (Aaa//AAA/) is set to price $200 million of PSF-insured unlimited tax school building bonds, Series 2024, serials 2025-2049. Oppenheimer.
Galveston, Texas, (/A/A-/) is set to price Thursday $160 million of Wharves and Terminal first lien revenue bonds, consisting of $111.525 million of Series 2024A, and $48.475 million of Series 2024B. Piper Sandler & Co.
The Utah Housing Corp. (Aa2///) is set to price Tuesday $147.5 million of taxable single-family mortgage bonds, 2024 Series H. Jefferies.
The South Carolina Jobs Economic Development Authority (/AA/AA-/) is set to price Thursday $141.13 million of McLeod Health Project healthcare revenue refunding bonds, Series 2024. J.P. Morgan.
The State of New York Mortgage Agency (Aa1///) is set to price Wednesday $140 million of social homeowner mortgage revenue bonds, consisting of $89.975 million of non-AMT bonds, Series 261, terms 2039, 2044, 2049, 2054; $30.025 million of AMT bonds, Series 262, serials 2025-2036; and $20 million of taxables, Series 263, term 2054. Ramirez.
The Elgin Independent School District, Texas, (Aaa/AAA//) is set to price Tuesday $139.565 million of PSF-insured unlimited tax school building bonds, Series 2024, Piper Sandler.
Lakeland, Florida, (A2///) is set to price Wednesday $138.14 million of fixed-mode Lakeland Regional Health System hospital revenue refunding bonds, Series 2024.J.P. Morgan.
The Oklahoma Water Resources Board (/AAA/AAA/) is set to price Tuesday $130 million of Clean Water Program Revolving Fund revenue bonds, Series 2024, serials 2026-2049.
The Michigan Finance Authority is set to price Tuesday $127.23 million of state aid revenue notes, consisting of $62.31 million of Series 24A-1, and $64.92 million of Series 24A-2. J.P. Morgan.
The Wisconsin Public Finance Authority (Aa3///) is set to price Thursday $120 million of tax-exempt pooled securities, Series 2024-2, Class A certificates. J.P. Morgan.
Competitive
Connecticut (Aa3/AA-/AA-) is set to sell $223.365 million of GO refunding bonds, Series 2024 E, at 11 a.m. Eastern Tuesday.
The Virginia Residential Authority (Aa1/AA/) is set to sell $53.84 million of state moral obligation revenue bonds for the Virginia Pooled Financing Program, Series 2024B, at 10:45 a.m. eastern Tuesday, and $122.230 million of infrastructure revenue bonds for the Virginia Pooled Financing Program, Series 2024B, at 10:15 a.m. Eastern Tuesday.
Orangeburg, South Carolina, is set to sell $155 million of GO bond anticipation notes, Series 2024, at 11 a.m. Eastern Tuesday.
Richmond, Virginia, is set to sell $124.43 million of GO public improvement bonds, Series 2024C, at 10:30 a.m. Eastern Wednesday.