Munis grow stronger as short-term UST cheapen slightly

Munis richened on the short end Wednesday, as short-term U.S. Treasuries were slightly weaker and equities ended higher.

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Muni yields were up to six basis points firmer, depending on the scale, with the biggest gains at the front end of the curve.

The markets are growing more comfortable ahead of the Nov. 3 midterm elections, said James Pruskowski, managing director at Hennion & Walsh. Munis are following USTs, which have held firm recently.

Investors are seeing signals of a UST market “that’s not complacent, but one that values safe haven assets in the face of a lot of uncertainty, whether related to AI, Nov. 3, the [Federal Reserve monetary policy meeting] next week, or just the short term, hopefully, civil unrest [in France].”

ICI data
The Investment Company Institute Wednesday reported outflows of $6.908 billion for the week ending Oct. 14, following $5.536 billion of outflows the previous week. Outflows have topped $1 billion each of the past five weeks.

Exchange-traded funds saw inflows of $8.029 billion after $4.629 billion of inflows the week prior, per ICI data. This is the sixth consecutive week of inflows greater than $1 billion.

New-issue market
In the primary market Wednesday, Jefferies priced for the Kentucky Public Energy Authority (Aa2///) $887.48 million of gas supply revenue bonds, Series 2026B, with 5s of 12/2027 at 3.77%, 5s of 2031 at 4.39% and 5.5s of 2033 at 4.77%, callable 9/2033.

In the competitive market, the Dormitory Authority of the State of New York (Aa1///AAA/) sold $1.616 billion of general purpose personal income tax revenue bonds, Series 2026C. The first series, $415.55 million of Bidding Group 1 bonds, sold to BofA Securities with 5s of 3/2028 at 3%, 5s of 2031 at 3.35% and 5s of 2033 at 3.61%, noncall.

The second series, $401.79 million of Bidding Group 2 bonds, sold to Jefferies with 5s of 3/2034 at 3.67% and 5s of 2036 at 3.85%, subject to make-whole call.

The third series, $300.07 million of Bidding Group 3 bonds, sold to BofA Securities with 5s of 3/2037 at 3.95%, 5s of 2041 at 4.47% and 5s of 2046 at 4.85%, callable 9/2036.

The fourth series, $217.175 million of Bidding Group 4 bonds, sold to Wells Fargo with 5.25s of 3/2047 at 4.99% and 5s of 2051 at 5.10%, callable 9/2036.

The fifth series, $281.775 million of Bidding Group 5 bonds, sold to Morgan Stanley with 5.25s of 2/2052 at 5.17% and 5.25s of 2056 at 5.32%, callable 9/2036.