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20th July 2026

Municipal market update

MMD underperformed USTs this week, with muni yields rising 6–12 bps across the curve while Treasury yields were flat to 5 bps lower. The move came as fixed income markets absorbed renewed inflation pressure from higher energy prices, with Brent crude increasing from $76.01/bbl last Friday to $88.10/bbl this Friday, while markets continue to price a 61.4% probability of a September FOMC rate hike.

The SIFMA Municipal Swap Index reset to 2.91%, 109 basis points higher than the prior week.

Much of the volatility in munis, however, was driven by MMD/UST ratios moving back toward historical norms after reaching unusually rich levels at the start of last week, resulting in muni underperformance relative to Treasuries.

MMD/UST ratios have largely normalized after beginning last week at historically rich levels. The 5-year ratio increased to 64% from 61%, while the 10-year ratio rose to 69% from 67%, bringing both maturities closer to their long-term averages. The 30-year ratio increased to 86% from 85%, but long munis remain relatively rich, sitting 2 percentage points below their 5-year average of 88% and 7 percentage points below their 10-year average of 93%. Despite the week's sell-off, the long end continues to offer less relative value versus historical norms than intermediate maturities.

Municipal technicals remain supportive despite the recent repricing. Visible supply stands at $13.19 billion, while municipal bond funds recorded $1.4 billion of inflows for the week, matching the prior week's total and extending the market's inflow streak to 13 consecutive weeks. Year-to-date net inflows now total $35.12 billion, reflecting continued demand for municipal bonds and providing a constructive backdrop as summer reinvestment cash remains available to absorb new issuance. The SIFMA Municipal Swap Index reset to 2.91%, 109 basis points higher than the prior week.

Cabrera Capital Markets will serve as Senior Manager on the week's fifth-largest transaction, Magnolia ISD’s $450 million Unlimited Tax School Building Bonds, Series 2026 (Aaa/NR/NR/NR – PSF). The Firm will also serve as Co-Manager on the $1.50 billion New York City Transitional Finance Authority Future Tax Secured Subordinate Bonds, Fiscal 2027 Series A, and the $943.9 million City of San Antonio Airport System Revenue and Refunding Bonds, Series 2026. The three largest transactions of this week include the following:

  • $1.50 billion New York City Transitional Finance Authority Future Tax Secured Subordinate Bonds, Fiscal 2027 Series A (Tax-Exempt) (NR/NR/NR/NR)

  • $1.17 billion District of Columbia Income Tax Secured Revenue Bonds, Series 2026A (Tax-Exempt) and Series 2026B (Federally Taxable) (Aa1/AAA/NR/NR)

  • $943.9 million City of San Antonio Airport System Revenue and Refunding Bonds, Series 2026 (AMT) (A2/A+/A+/NR)

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Municipal market update

Municipal bonds outperformed U.S. Treasuries this week, with the AAA MMD scale bumped in all five sessions.

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