Municipals were steady to slightly firmer Thursday as the $2.5 billion Brightline West Passenger Rail Project deal priced amid a quieter new-issue market. U.S. Treasury yields fell slightly and equities were down.
The two-year municipal to UST ratio Thursday was at 62%, the five-year at 63%, the 10-year at 67% and the 30-year at 85%, according to Municipal Market Data’s 3 p.m. EST read. ICE Data Services had the two-year at 62%, the five-year at 63%, the 10-year at 65% and the 30-year at 82% at 4 p.m.
In January, tariff-driven inflation concerns briefly pushed the 10-year UST yield to 4.80%. Still, the month “ultimately closed unchanged at 4.54% as markets adjusted to shifting macro narratives,” said James Pruskowski, chief investment officer at 16Rock Asset Management.
“The emergence of Deepseek reshaped expectations in the AI sector, cabinet hearings progressed without disruption, and the pace of new policy implementation accelerated meaningfully,” he said.
In February, Pruskowski noted, “rates remain volatile yet confined within a range, while fund inflows continue to surge alongside increasing calls for lower rates.”
“This week is set up well for the tax-exempt market, given last week’s underperformance, the arrival of relatively sizable mid-month reinvestment capital ($18 billion), and light supply ($4.3 billion, which is low even considering the shortened holiday week),” said J.P. Morgan strategists, led by Peter DeGroot.
Fund flows have also been “broadly supportive” and are expected to remain so given “range-bound to lower UST rates,” they said.
Beyond February, J.P. Morgan strategists said, “there will be intermittent periods to get invested at cheaper levels in the more challenging technical period in March-May, as reinvestment capital dwindles and supply accelerates.”
The primary issuance pipeline continues to be strong, but “the evolving composition of supply presents challenges in sourcing targeted exposure amid accelerating fund flows,” Pruskowski said.
“With dealer balance sheets well-managed, supportive technicals should help offset the seasonal weakness ahead,” he said.
Tax-exempt ratios “largely suggest neutral relative value versus corporates and taxable municipals,” J.P. Morgan strategists said.
Yields on long-dated high-grade munis are near one-year highs, with long UST rates remaining closer to three-year highs, they said.
As such, ”absolute yields on the long-end appear attractive based on their historical trading range, especially when considering our long-term projections for lower rates in 2025,” J.P. Morgan strategists said.
In the primary market Thursday, Morgan Stanley priced for the California Infrastructure and Economic Development Bank $2 billion of non-rated Brightline West Passenger Rail Project green revenue bonds, Series 2025A, with 9.5s of 1/2065 with a mandatory tender date of 1/1/2035 at 9.941%.
Morgan Stanley priced for the Director of the State of Nevada Department of Business and Industry $500 million of non-rated Brightline West Passenger Rail Project green revenue bonds, Series 2025A, with 9.5s of 1/2065 with a mandatory tender date of 1/1/2033 at 10.154%.
Siebert Williams Shank priced for Miami-Dade County, Florida, (/A+/A+/AA-/) $527.065 million of airport revenue bonds. The first tranche, $264.555 million of AMT Series 2025A bonds, saw 5.25s of 10/2050 at 4.62% and 5.5s of 2055 at 4.63%, callable 10/1/2034.
The second tranche, $71.965 million of non-AMT Series 2025B bonds, saw 5s of 10/2050 at 4.27% and 5.25s of 2055 at 4.31%, callable 10/1/2034.
Pricing details for the third tranche, $190.545 million of taxable Series 2025C bonds, were unavailable as of 3:30 p.m.
Barclays priced for the Wisconsin Health and Educational Facilities Authority (A1/AA-/NR/NR/) $231.2 million of Aspirus Obligated Group revenue bonds, with 5s of 8/2034 at 3.27%, 5s of 2035 at 3.34%, 5s of 2040 at 3.69%, 5s of 2045 at 4.25%, 5.25s of 2050 at 4.40%, 5.25s of 2055 at 4.51% and 4.375s of 2055 at 4.61%, callable 8/15/2035.
Siebert Williams Shank priced for the Board of Regents of the Texas Tech University System (Aa1/NR/AA+/AA+/) $306.035 million of revenue financing system refunding and improvement bonds, with 5s of 2/2026 at 2.73%, 5s of 2030 at 2.84%, 5s of 2035 at 3.12%, 5s of 2040 at 3.51%, 5s of 2045 at 4.01%, 5s of 2050 at 4.21% and 4.25s of 2055 at 4.41%, callable 2/15/2035.
Fund flows
Investors added $546.3 million to municipal bond mutual funds in the week ending Wednesday, following $238.5 million of inflows the prior week, according to LSEG Lipper data.
High-yield funds saw inflows of $184 million compared to the previous week’s inflows of $313 million.
Tax-exempt municipal money market funds saw outflows of $769 million for the week ending Feb. 18, bringing total assets to $131.06 billion, according to the Money Fund Report, a weekly publication of EPFR.
Taxable money-fund assets saw $19.21 billion pulled.
The average seven-day simple yield was at 4.05%.
The SIFMA Swap Index fell to 2.91% Wednesday compared to the previous week’s 3.36%.
AAA scales
MMD’s scale was bumped up to two basis points: The one-year was at 2.64% (-2) and 2.66% (-2) in two years. The five-year was at 2.74% (-2), the 10-year at 3.00% (unch) and the 30-year at 4.01% (unch) at 3 p.m.
The ICE AAA yield curve was bumped up to two basis points: 2.69% (unch) in 2026 and 2.65% (-1) in 2027. The five-year was at 2.75% (-2), the 10-year was at 2.97% (-2) and the 30-year was at 3.91% (-2) at 4 p.m.
The S&P Global Market Intelligence municipal curve was little changed: The one-year was at 2.66% (-1) in 2025 and 2.67% (-1) in 2026. The five-year was at 2.76% (unch), the 10-year was at 2.99% (unch) and the 30-year yield was at 3.93% (unch) at 4 p.m.
Bloomberg BVAL was bumped one to two basis points: 2.56% (-2) in 2025 and 2.63% (-1) in 2026. The five-year at 2.74% (-1), the 10-year at 2.99% (-1) and the 30-year at 3.93% (-1) at 4 p.m.
Treasuries were firmer.
The two-year UST was yielding 4.269% (flat), the three-year was at 4.277% (-1), the five-year at 4.344% (-2), the 10-year at 4.502% (-3), the 20-year at 4.776% (-5) and the 30-year at 4.742% (-2) near the close.