The municipal bond market was narrowly mixed ahead of smaller supply slate, while Treasury yields rose and equity prices were marginally lower on the day.
The day’s moves led municipal to UST ratios to fall slightly.
The two-year municipal to UST ratio Tuesday was at 62%, the five-year at 63%, the 10-year at 66% and the 30-year at 84%, 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 67% and the 30-year at 84% at 4 p.m.
Municipal market spreads last week “saw a complete 180 from the prior week,” according to Jason Wong, vice president of municipals at AmeriVet Securities.
Muni market yields rose by an average of 4.3 basis points across the curve, he said, with yields on 10-year notes rising by four bps to end the week at 3.00%. “With yields rising, munis did underperform versus Treasuries, as the 10-year muni-to-Treasury ratio is now yielding 67.18%, compared to the prior week when the ratio was yielding 66.01%,” he said. The muni curve steepened slightly by 7.2 bps to 132 bps.
The main reason for the rise in yields across the curve, both in munis as well as other fixed income markets, was the consumer price index, which came in “hotter than expected,” Wong said. That “could indicate that the Fed may hold off cutting rates later this year.”
Indeed, Birch Creek Capital noted, the headline CPI figure was the largest increase since August 2023 and the core figure gained the most since March 2024. That caused Treasuries to sell off 8-10 bps and pushed “the odds of the next rate cut all the way to December.”
Prior to the release of the CPI report, muni returns for the month were up roughly 0.33%, Wong said. “However, once inflation numbers were released, muni yields were sent higher, bringing returns into the red for the month before Friday’s rally, which brought returns back up to 0.21% for the month and year-to-date returns to 0.71%. With the threat of tariffs from the Trump administration looming, inflation could be pushed even higher this year.”
Scott Colbert, executive vice president, chief economist and director of fixed income management at Commerce Trust, said “there’s no doubt that the downside of tariffs is inflation, or higher expenses. It’s definitely a tax which is borne by a number of entities. But ultimately the end user will pay some of that tax in terms of a higher price.”
However, there is also a potential upside to tariffs, at least for some American companies, he said. “For those corporations that are willing to bring jobs back to produce most of the goods and services in this country rather than importing them from outside, it’s going to lower their tax rates probably from 21% to 15%, which of course is positive for the stock market,” Colbert said.
It may take some time before the effect of tariffs on the economy fully shakes out, however, he said. “Every economic cycle is a little like a Tom Cruise movie,” he explained. “Tom is very good at something to start, but during the middle something bad happens to him, where he almost loses his way, but then by the end of [the movie] he’s back to where he was. The economy basically runs through the same cycle.”
Indeed, some of that bounce-back was seen in last week’s fixed income trading, Birch Creek Capital noted. On Thursday, the day after the CPI report came out, PPI inflation “also printed stronger, but after investors looked under the hood and saw that the components that flow into the Fed’s preferred core PCE gauge came in relatively soft, Treasuries clawed back most of the prior day’s losses,” it said. “The reversal continued through Friday after retail sales in January saw a sharp drop, with a broad-based slowdown seen across most categories. By the end of the week, it almost seemed as if nothing happened, since the entire curve finished within 1-3 bps of where it started.”
Secondary muni market trading totaled over $38 billion last week, with 54% of all trading being dealer sells, according to Wong. The bulk of the trading volume was executed on Wednesday. Citing Bloomberg data, clients put roughly $5.84 billion up for the bid, up slightly from the prior week’s bids-wanted volume of $5.63 billion.
Muni bond funds added roughly $239 million last week, according to LSEG Lipper Global Funds Flow data, the fourth consecutive weekly increase in inflows. Inflows totaled $1.1 billion the prior week.
The worst performance in investment-grade munis last week was “in the belly of the curve, where last week’s primary calendar was most concentrated in,” Birch Creek Capital said. “Given the amount of new issuance that needed to clear and volatility causing underwriters to offer generous new issue concessions, it was no surprise that many buyers sat on the sidelines waiting for spreads to come to them.”
Looking ahead, “despite some improved technicals heading into [this] week, we expect market-moving headlines will continue to roll in, causing Treasuries to remain volatile and leave muni investors lacking in conviction,” the firm said. “The long end of the curve behind a 4% [yield] should help bring some retail investors back into the market, but we remain of the belief that most returns for the year will come from carry.”
AAA scales
MMD’s scale was bumped one to two basis points: The one-year was at 2.66% (unch) and 2.68% (unch) in two years. The five-year was at 2.76% (-1), the 10-year at 3.00% (-2) and the 30-year at 4.01% (unch) at 3 p.m.
The ICE AAA yield curve was little changed to weaker in spots: 2.70% (unch) in 2026 and 2.67% (unch) in 2027. The five-year was at 2.78% (+1), the 10-year was at 3.00% (+1) and the 30-year was at 3.93% (unch) at 3:45 p.m.
The S&P Global Market Intelligence municipal curve was bumped a basis point or two: The one-year was at 2.67% (-1) in 2025 and 2.68% (-1) in 2026. The five-year was at 2.76% (-1), the 10-year was at 2.99% (-1) and the 30-year yield was at 3.92% (-2) at 3 p.m.
Bloomberg BVAL was bumped three to four basis points: 2.58% (unch) in 2025 and 2.65% (unch) in 2026. The five-year at 2.75% (unch), the 10-year at 2.99% (unch) and the 30-year at 3.93% (unch) at 3 p.m.
Treasuries were weaker.
The two-year UST was yielding 4.301% (+4), the three-year was at 4.326% (+6), the five-year at 4.399% (+7), the 10-year at 4.552% (+8), the 20-year at 4.83% (+8) and the 30-year at 4.776% (+8) at near the close.
Primary to come
Miami-Dade County, Florida, (/A+/A+/AA-/) is set to price Thursday $525.93 million of airport revenue bonds, consisting of $263.765 million of AMT Series 2025A bonds, terms 2050, 2055; $71.62 million of non-AMT Series 2025B bonds, terms 2050, 2055; and $190.545 million of taxable Series 2025C bonds, term 2048. Siebert Williams Shank.
The Pennsylvania Economic Development Financing Authority (Aa3//AA-/) is set to price Wednesday $500 million of taxable Economic Development and Infrastructure programs revenue bonds, serials 2026-2042, term 2054. BofA Securities.
The Board of Regents of the Texas Tech University System (Aa1/NR/AA+/AA+/) is set to price Thursday $298.375 million of revenue financing system refunding and improvement bonds, serials 2026-2045, terms 2050, 2055. Siebert Williams Shank.
The New Hope Cultural Education Facilities Finance Corp. is set to price Wednesday $248.075 million of non-rated Superior Living Foundation Project senior living revenue bonds, Series 2025A, terms 2035, 2045, 2056. Oppenheimer.
The Wisconsin Health and Educational Facilities Authority (A1/AA-/NR/NR/) is set to price Thursday $235.02 million of Aspirus Obligated Group revenue bonds, serials 2034-2045, terms 2050, 2055, 2055. Barclays.
The Union Sanitary District Financing Authority (/AAA//) is set to price Wednesday $192.89 million Alameda County interim notes, Series 2025A, serial 2030. RBC Capital Markets.
The Oregon City School District No. 62 (/AA+//) is set to price Wednesday $162.999 million of GOs, consisting of $26.349 million of Series 2025A and $113.65 million of Series 2025B. Piper Sandler.
The Houston Independent School District is set to price Wednesday $151.245 million of refunding bonds, consisting of $116.325 million of PSF-guaranteed Series 2025A limited tax bonds (Aaa/AAA//), serials 2029-2032, 2034-2037, 2039-2042; and $34.92 million of non-PSF-guaranteed maintenance tax bonds, serials 2031-2033, 2035-2037. Siebert Williams Shank.
The San Mateo County Transit District (/AAA//) is set to price Wednesday $122.145 million of limited tax refunding bonds, 2025 Series A, serials 2026-2034. BofA Securities.
The State of New York Mortgage Agency (Aa1/NR/NR/NR) is set to price Thursday $100 million of social homeowner mortgage revenue bonds, consisting of $79.515 million of non-AMT Series 266 bonds and $20.485 million of AMT Series 267 bonds. Morgan Stanley.
Competitive
Guilford County (Aaa/AAA//) is set to sell $570 million of GO school bonds at 11 a.m. Thursday.
Hudson County is set to sell $210.955 million of bond anticipation notes at 11 a.m. Thursday.