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Municipal bonds see weakness on the short end of the curve, while two high-end issuers price in their biggest trades remaining this week, flows into mutual funds decline, and Treasuries trade weaker for the first time in a decade The market ended, but after that it became a little stronger. length. Stocks rose as the market thought a soft landing by the Fed was more likely.
LSEG Lipper reported $63.8 million in inflows for the week ending Wednesday, following $305 million in inflows the previous week. The four-week moving average of inflows was $321.1 million, down from the previous week’s inflows of $341.7 million.
Flows into high-yield municipal bond funds were $180.4 million, compared with $278.6 million last week, marking the 11th consecutive week of positive inflows for the sector. Despite the strong performance, there are fundamental concerns about the high-yield market.
Jefferies major Thursday priced $722,505,000 for New York City Water Finance Corporation project, Second Resolution State Clean Water and Drinking Water Revolving Fund Revenue Bond Series 2024 A for New York State Environmental Facilities Corporation and repriced to lower yields. (Oh/AAA/AAA/). Maturity June 2025, 5% coupon yield 3.01% (-2), 2029 5s 2.56%, 2034 5s 2.60% (-5), 2039 5s 3.80% (-8), 5.25s 2044 5 seconds in 2049 is 3.83% (-4), 5 seconds in 2053 is 3.87% (-4), billable on June 15, 2034.
Morgan Stanley & Co. has priced its $125 million Fairfax County, Virginia, sewer revenue bond (Aaa/AAA/AAA/) at 3.01% July 2025 5s and 2.55 2029 5s. %, 2034 5s was set at 2.61%. , 5 in 2039 is 3.05%, 5 in 2044 is 3.50%, 5 in 2049 is 3.76%, 5 in 2054 is 3.86%, callable on July 15, 2034.
Kim Ol-sang, senior vice president at FHN Financial, said that while there were no major changes in post-FOMC policy from a fundamental perspective, the ongoing readjustment of ratios led to a gradual flattening of the bear market. did.
The Muni-to-UST ratio was flat on Thursday. The Treasury-to-Treasury ratio on Thursday for two-years was 61%, three-years 60%, five-years 58%, 10-years 58% and 30-years 82%, the paper said. Data from Refinitiv Municipal Market Data as of 3:00 p.m. ET. ICE Data Services was 61% two years, 59% three years, 58% five years, 59% 10 years and 81% 30 years as of 3:30 p.m.
Mr. Orsan said that even outside of monetary policy activity, “a quiet theme has emerged of greater bid preferences and bid totals.”
He said on the day of the Federal Open Market Committee meeting and interest rate announcement, the agency reached its highest bid for the month, totaling $1.29 billion.
“This is the sixth consecutive session of more than $1 billion, which is not unusual as we approach the end of a month or quarter, but bidders’ tolerance to maintain a stable level increases,” Orsan said. It is also related to.”
Another factor Mr. Orsan has noted is the gradual increase in the total amount of secondary offerings.
“Bloomberg’s PICK offer platform has climbed into the $7 billion range, matching volumes from last November, when yields were at their most volatile,” he said. “Both metrics are worth noting, as the last two weeks of the month will see several large issues from California, New York, Washington, and Texas (Austin School priced at $750 million) This marks the second largest PSF issuance this year).
The supply of bond buyers is $12.05 billion.
AAA scale
Refinitiv MMD’s size remained unchanged at 3.07% in 1 year and 2.84% in 2 years. As of 3 p.m., the five-year bond is 2.47%, the 10-year bond is 2.47%, and the 30-year bond is 3.65%.
The ICE AAA yield curve has been lowered in the short term to 3.12% (+2) in 2025 and 2.89% (+3) in 2026. The 5-year was 2.53% (+2) and the 10-year was 2.50. % (Poop), 30 Year Old was 3.59% (Poop) as of 4 p.m.
The S&P Global Market Intelligence municipal curve has been lowered in the short term. For one-years, he was 3.08% (+2) in 2025 and 2.86% (+2) in 2026. The 5-year was 2.50% (unch). According to readings at 3 p.m., the 10-year bond yield was 2.49% (poo) and the 30-year bond yield was 3.62% (poo).
Bloomberg BVAL was little changed, at 3.06% (+1) in 2025 and 2.87% (unch) in 2026. The 5-year was 2.45% (unch), the 10-year was 2.46% (unch), and the 30-year was 2.46% (unch). 3.63% (poo) as of 4pm
National debt was mixed.
The 2-year UST yield was 4.645% (+4), the 3-year yield was 4.422% (+3), the 5-year yield was 4.258% (+2), and the 10-year yield was 4.271% (stable). The closing price was 4.531%(-2) for 20-year bonds and 4.436%(-2) for 30-year bonds.
FOMC Redux
Following Wednesday’s statement and outlook from the Federal Open Market Committee, most analysts expect the committee to begin lowering rates in June or July.
Carl Riccadonna, chief U.S. economist at BNP Paribas, said the dot plot shows just three rate cuts this year, and the bank is “even more confident in predicting the first rate cut in June.” said.
He said the statement sent a clear message: “Fed policymakers need more evidence and more confidence before they’re ready to start cutting rates, but the big decision “We remain confident in our direction.”
“As long as core PCE inflation moderates enough in the coming months to bring six-month growth back near 2%, the Fed will move toward its first rate cut in June,” Ryan Swift said. That’s our view.” U.S. Fixed Income Strategist at BCA Research.
BCA plans to make three to four job cuts this year.
Morgan Stanley predicts rate cuts in June, September, November and December.
“Bond markets will continue to struggle between expectations for lower interest rates, which is good for bonds, and expectations for higher inflation tolerance, which is bad for bonds,” said Christian Hoffman, portfolio manager at Thornburg Investment Management. .
Sarah House and Michael Pugliese, senior economists at Wells Fargo Securities, said the SEP “suggests that the FOMC believes inflation is returning to its 2% target, but achieving that goal is unlikely. “It is likely that this will be a little later than previously expected.”
It also expects a rate cut in June. “However, the risks to our outlook are that the FOMC could start easing a little later in the summer, or proceed at a slower pace, ending up with less than the 100 basis points of easing we expect by the end of this year. biased,” they said. Said.
Paul Mielcharski, head of global macro strategy at Brandywine Global, said the rise in inflation over the past two months was a short-term challenge for the Fed, and the disinflation process remains on track. ” he said.
But he said, “We need to see inflation slowing down” before cutting rates.
“The Fed’s economic outlook incorporates the idea that recent economic strength reflects, in part, strong labor force and productivity growth,” Mielcharski said. “This allows for faster economic growth without additional inflationary pressures.”
Paul Feinstein, CEO and founder of Odent Global Asset Management, said: “Rate changes and election dynamics collide for an economic showdown that rivals the frenzy of a March Madness tournament.” The stage is set for an interesting year.” “We’ve seen markets move in the opposite direction of what the Fed is envisioning.
Gary Siegel contributed to this report.
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