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13th July 2026

Municipal market update

MMD and USTs both sold off this week, but MMD held up better. Muni yields rose 2–7 bps versus UST yields up 6–10 bps on the 5- and 30-year, reflecting the strong technical backdrop from reinvestment demand and moderate supply.

The SIFMA Municipal Swap Index reset to 1.82%, 18 basis points higher than the prior week.

The move was driven by a combination of renewed geopolitical risk out of the Middle East pushing oil prices higher, hawkish FOMC minutes revealing several policymakers open to a rate hike if inflation stays elevated, and sticky inflation data (CPI at 4.2% YoY) keeping the Fed's dual mandate in focus. Markets are now pricing roughly a 66.3% probability of a September rate hike, with the long end pressured by rising term premium and persistent inflation concerns.

Looking ahead, Munis are expected to continue performing well as July reinvestment cash continues to outpace supply. Visible supply stands at $12.8 billion, while municipal bond funds recorded approximately $1.4 billion of inflows this week (vs. $1.7 billion the prior week), marking 12 consecutive weeks of positive inflows. YTD net inflows into Munis now total $33.72 billion, already tracking meaningfully against the trailing twelve-month total of $50.98 billion. YTD there have been only two weeks of net outflows, one of which was tax week, a week that has consistently printed negative over the last 5 years.

Notably, Muni ETFs have seen $35.9 billion of inflows YTD, with AUM reaching $223 billion across 170 ETFs. BlackRock and Vanguard remain the dominant managers at 58% of ETF AUM, though down from a high of 65% in Q4 2025 as the sponsor base broadens. SMAs continue to grow as well, with total SMA AUM at $55.89 trillion across all asset classes, up $26.258 trillion since 2017. Direct muni holdings within SMAs have grown from $1.27 trillion to $2.79 trillion over that same period, though as a percentage of total SMA AUM they have declined from 4.8% to 3.7%. This trend is consistent across asset classes, as SMAs have increased their allocation to registered funds and pooled vehicles by 30.1% since 2017.

The SIFMA Municipal Swap Index reset to 1.82%, 18 basis points higher than the prior week.

The three largest transactions of this week include the following:

  • $2.36 billion Aquarion Water Authority Water System Revenue Bonds, (TBD)

  • $720.0 million New Jersey Turnpike Authority Turnpike Revenue Bonds, Series 2026A (A1/AA-/NR/NR)

  • $503.9 million Louisville & Jefferson County Metro Government Health System Revenue Bonds, (Norton Healthcare, Inc.), Series 2026A (NR/A/A+/NR)

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