2nd March 2026

Municipal market update

Last Friday’s January Producer Price Index (PPI) came in stronger than expected, rising 0.5% on a seasonally adjusted basis, the largest monthly increase since September last year; on a year-over-year basis, headline PPI increased 2.9%, remaining above the Federal Reserve’s 2% inflation target. Both figures signal that underlying price pressures persist within the U.S. economy. Despite the firmer inflation reading, Treasuries rallied with the 10-year yield declining 5 basis points to 3.97%, the lowest level in four months.

Municipal bond issuance is projected to reach approximately $9.6 billion this week.

The move reflected broader risk-off sentiment rather than a direct reaction to the inflation data amid growing concerns that artificial intelligence could weigh on future employment and contribute to slower economic growth. Notably, the United States and Israel’s air strike against Iran over the weekend triggered a sharp sell-off in global equity markets, while oil and gold prices surged as investors braced for the potential economic repercussions of a broader conflict in the Middle East. Consequently, increased inflation concerns are putting additional upward pressures on Treasury yields.

In contrast, the Municipal market remained resilient and was largely unaffected by the volatility. On the week, municipals posted solid performance, supported by stable technicals and consistent demand. Strong inflows continued as Lipper reported another $1 billion, representing the fourteenth consecutive week of inflows, putting the total inflow in 2026 to over $39 billion. The SIFMA Municipal Swap Index reset to 1.88%, down from the previous week of 2.22%. Expectations for the Federal Reserve’s next rate cut continue to shift later in the year, with markets now pricing in the first reduction occurring no earlier than June, and more likely in September.

Municipal bond issuance is projected to reach approximately $9.6 billion this week. Cabrera will serve as co-manager on a $94 million City of Waco, Texas Certificate of Obligation bond sale.

Some of the week’s largest transactions include the following:

$1.42 billion City of Houston, Texas, Convention & Entertainment Facilities Department Hotel Occupancy Tax and Special Revenue Refunding Bonds, Series 2026A (-/AA-/-/-), 2026B (-/AA-/-/-), 2026C (-/A-/-/-), 2026D (-/BBB+/-/-)
$900.00 million California Community Choice Financing Authority Clean Energy Project Revenue Bonds (Green Bonds) (A3/-/-/-)
$786.25 million Arizona Transportation Board Highway Revenue and Revenue Refunding Bonds, Series 2026 (Aa1/AA+/-/-)

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