Munis follow USTs to a rally

U.S. Treasuries rallied on Thursday, spurring munis to a rally of their own, as equities ended higher.

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Munis were bumped by nine to 17 basis points, depending on the scale, with the 30-year yield dropping under 5%.

USTs richened by four to 10 basis points, with the biggest gains on the long end of the curve.

Munis were mostly “along for the ride” for the UST rally, said Kim Olsan, portfolio manager at NewSquare Capital.

“Whether the govies rally is real or just a blip, in terms of rotating out of tech stocks into fixed income, we’ll have to see about that,” Olsan said.

Some issuers who’d kept their deals on hold jumped into the market on Thursday, Olsan noted, including a $1 billion deal from the Black Belt Energy Gas District.

Olsan expects muni-to-UST ratios to stay on the wider side over the next week; she feels supply still slightly exceeds the cash available. But if the range for USTs holds, ratios may begin to tighten in November, she said.

Fund flows
Investors added $1.612 billion into municipal bond mutual funds in the week ended Wednesday, following $1.061 billion of inflows the prior week, according to LSEG Lipper data.

Exchange-traded funds saw $5.047 billion of inflows, the highest on record, while open-end funds saw outflows of $3.435 billion, the largest outflow cycle since June 2022, according to J.P. Morgan

High-yield funds saw outflows of $540.1 million compared to outflows of $163.8 million the previous week, per LSEG.

New-issue market
In the primary market Thursday, Morgan Stanley priced for the Black Belt Energy Gas District (Aa3///) $1.08 million of gas project revenue bonds, Series 2026O, with 5s of 4/2028 at 4.17%, 5s of 4/2031 at 4.52% and 5.5s of 4/2036 at 5.05%, callable 1/2036.

In the competitive market, Nevada (Aa1/AA+/AA+/) sold $685.915 million of limited tax GOs across five series.

The first series, $104.78 million of capital improvement bonds, Series 2026B, sold to J.P. Morgan with 5s of 5/2027 at 3.06%, 5s of 2031 at 3.36% and 5s of 2036 at 3.77%, noncall.

The second series, $399.15 million of capital improvement and open space bonds, Series 2026D, sold to BofA Securities with 5s of 5/2027 at 3.04%, 5s of 2031 at 3.36%, 5s of 2036 at 3.77%, 5s of 2041 at 4.37% and 5s of 2045 at 4.65%, callable 11/2036.

The third series, $95.05 million of school district capital improvement bonds, Series 2026E, sold to BofA Securities with 5s of 5/2027 at 3.04% and 5s of 2030 at 3.22%, noncall.

The fourth series, $36.935 million of natural resources and open space bonds, Series 2026F, sold to BofA Securities with 5s of 5/2027 at 3.04%, 5s of 2031 at 3.36% and 5s of 2036 at 3.77%, noncall.

The fifth series, $50 million of taxable attainable housing bonds, Series 2026G, sold to J.P. Morgan, with 4.65s of 5/2027 and 4.86s of 2028, both priced at par, noncall.