26th October 2026

Municipal market update

Treasuries rallied last week, with the long end outperforming ahead of the Fed meeting this week.

Over the week, MMD yields fell 10-34 basis points, with the 2-year down 34 basis points, the 5-year down 24, the 10-year down 23, and the 30-year down 10.

Early in the week, a French bond selloff and AI-sector jitters supported a flight-to-quality trade, culminating on Thursday in a sharp rally driven by a steep selloff in AI-related equities. This briefly pushed the 10-year yield below 5% for the first time in a month. Yields cheapened by 3-5 basis points on Friday as tech losses eased, French bonds stabilized, and oil resumed its climb, with Brent crude finishing the week at $116.72 per barrel. With the Fed in its blackout period ahead of Wednesday’s FOMC decision, futures imply roughly a 90% probability of no change in rates. Municipals saw a much steeper yield curve, with a significant rally on the short end. Municipals outperformed through 10 years, with ratios improving by as much as 3-6 percentage points. The market absorbed a $14.9 billion calendar as year-to-date issuance crossed the $500 billion mark. The calendar was about $1 billion larger than scheduled, as refundings that had not previously been viable entered the market. Municipal funds reported roughly $1.6 billion of inflows for the week ended October 21, according to LSEG Lipper. Over the week, MMD yields fell 10-34 basis points, with the 2-year down 34 basis points, the 5-year down 24, the 10-year down 23, and the 30-year down 10. Treasury yields fell 2-10 basis points, with the 2-year down 2 basis points, the 5-year down 6, the 10-year down 8, and the 30-year down 10. This left municipal-to-Treasury ratios near 58% for the 2-year, 64% for the 5-year, 71% for the 10-year, and 91% for the 30-year.

This week, primary-market supply is expected to decline to approximately $7.1 billion, with $4.8 billion negotiated and $2.3 billion competitive. Economic data this week includes Durable Goods, the Case-Shiller Home Price Index, New Home Sales and Consumer Confidence on Tuesday, the FOMC interest rate decision on Wednesday, the advance Q3 GDP and PCE Price Index on Thursday, and the Employment Cost Index and Chicago PMI on Friday. The three largest negotiated transactions this week include:

• $1.4 billion California Health Facilities Financing Authority Revenue Bonds (Cedars-Sinai Health System)

• $550 million Parkview Health System Taxable Bonds

• $262.9 million Connecticut Housing Finance Authority Housing Mortgage Finance Program Bonds (Taxable / Social Bonds)

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