Munis and USTs richen post-Fed meeting
Munis and U.S. Treasuries were richer on Thursday, a day after the Federal Open Market Committee held rates steady. Equities ended mixed.
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Muni yields richened by up to three basis points, depending on the scale. UST yields richened by four to six basis points, with the biggest gains at the front of the curve.
“The [Federal Reserve] is
Accordingly, the market has been lowering the odds of a December rate hike, and UST strength has been led by the short end rather than the long end, Pruskowski said. Corporate bonds have also seen strong demand, he noted.
The positive turn in the muni market “has structural tailwinds,” Pruskowski said. The yield cushion is still very appealing, he said, despite the stronger market since the peak late last month. Relative value has tightened most in the front end and the back end.
“In a world filled with uncertainty, we’re getting more clues that provide greater comfort, and rates that seem to have peaked,” Pruskowski said.
“The market has gained comfort in flows that are more changing wrappers [from mutual funds to exchange-traded funds , rather] than leaving the asset class,” Pruskowski said. “It appears the uncertainty that was driving a lack of demand, as well as high supply that caused some fear ahead of the midterms, has cooled down pretty quickly, and the market is finding room and greater comfort to perform again.”
Fund flows
Investors added $1.739 billion into municipal bond mutual funds in the week ended Wednesday, following $1.56 billion of inflows the prior week, according to LSEG Lipper data. This is the fourth straight week of inflows greater than $1 billion.
High-yield funds saw outflows of $545.7 million compared to outflows of $756.4 million the previous week. High-yield funds have seen eight straight weeks of outflows.
New-issue market
In the primary market Thursday, Barclays priced for the New Jersey Transportation Trust Fund Authority (A1/A/A/A+/) $1.698 billion of transportation program bonds, Series 2026 BB, with 5s of 5/2027 at 3.09%, 5s of 2031 at 3.43%, 5s of 2035 at 3.66%, 5.25s of 2041 at 4.32% and 5.25s of 2044 at 4.61%, callable 12/2036.
Loop priced for the North Texas Tollway Authority $650.855 million of system revenue and refunding bonds. The first tranche, $323.91 million of first tier bonds, Series 2026A,(Aa3/AA-//) saw 5s of 1/2032 at 3.30%, 5s of 2036 at 3.61%, 5s of 2043 at 4.59%, 5s of 2046 at 4.84% and 5s of 2047, callable 1/2036.
The second tranche, $326.945 million of second tier bonds, Series 2026B, (A1/A+//) 5s of 2032 at 3.37%, 5s of 2036 at 3.74%, 5s of 2041 at 4.32% and 5s of 2046 at 4.88%, callable 1/2036
