Municipal market update

Municipals began the week on strong demand, supported by alight summer new-issue calendar, improved municipal-to-Treasury ratios, and the approach of August reinvestment monies. Buying eased midweek as the market followed Treasuries lower in the wake of the Fed, before steadying into month-end. With municipal yields largely steady while Treasuries cheapened, municipal-to-Treasury ratios became richer on the week.

The Federal Reserve left its policy rate unchanged at 3.50%–3.75%, with three dissents in favor of a hike. Chairman Warsh did strike a firm tone on inflation while declining to offer forward guidance. Treasuries sold off in response, with the 30-year yield closing above 5.20% for the first time since 2007. The economic data offered a mixed picture: Second-quarter GDP came in soft at 1.5%, below expectations, while core PCE eased to 3.3% year-over-year but remained well above the Fed's target.

Energy prices were volatile throughout the week and kept an inflationary undertone in the market. Oil fell roughly 8% early in the week as the U.S. and Iran paused missile and drone attacks, then reversed higher midweek as tensions reignited around the Strait of Hormuz and the Red Sea. Municipal technicals remain supportive. Lipper reported inflows of $761 million for the week, extending the streak of consecutive inflows to 15 weeks, though high-yield funds saw modest outflows. The SIFMA Municipal Swap Index reset to 2.16%, 39 basis points lower than the prior week. Looking ahead, supply is set to increase meaningfully, with next week's tax-exempt calendar climbing to roughly $16.7 billion from $7.3 billion last week, a technical headwind after several weeks of light summer issuance.

Cabrera will serve as Senior Manager on Temple College District’s $48.6 million Limited Tax Bonds, Series 2026, and as Co-Manager on six additional transactions, including the City of New York’s $1.5 billion General Obligation Bonds, Fiscal 2027 Series A, the Lower Colorado River Authority’s $447.1 million Transmission Contract Refunding and Improvement Revenue Bonds, and the San Francisco Public Utilities Commission’s $406.3 million Wastewater Revenue Bonds. The three largest transactions of this week include the following:

• $1.5 billion City of New York General Obligation Bonds, Fiscal 2027 Series A (Tax-Exempt) (Cabrera Co-Manager)

• $1.3 billion Michigan Finance Authority Hospital Revenue and Revenue Refunding Bonds (Henry Ford Health), Series 2026A (Tax-Exempt) (A2/NR/A+/NR)

• $1.1 billion Colorado Health Facilities Authority Revenue Bonds (Intermountain Health), Series 2026A (Tax-Exempt) (Aa1/AA+/NR/NR)