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31st August 2026

Municipal market update

Municipals were largely range-bound last week, though with a modest bias toward weakness. We saw some softness in the 30-year portion of the curve midweek, while Treasury rates increased more meaningfully—by as much as 10 basis points on the front end—following Fed Chair Warsh’s hawkish Jackson Hole remarks that inflation is not yet meaningfully slowing.

Demand continues to be supported by fund flows, with municipal bond funds taking in $1.44 billion last week, up from $838 million the prior week.

Despite that move, municipal ratios finished the week at or less than their one-year trailing averages across most of the curve. The exceptions are the seven- and ten-year points of the curve, where municipals remain cheap relative to Treasuries. The ten-year municipal yield is currently about 70% of the comparable Treasury yield, roughly three percentage points above its one-year average, while the seven-year sits about one percentage point above its average. Last week’s $15.6 billion calendar was led by the State of California GO transaction, which was very well received and repriced meaningfully tighter. Demand continues to be supported by fund flows, with municipal bond funds taking in $1.44 billion last week, up from $838 million the prior week.

Secondary trading felt distinctly like a summer market. Volumes were down between 9% and 20% over the course of the week compared with what we experienced during the prior month. Even with the lighter activity, our trading desk was active in the secondary and competitive markets. Competitively we bid alone on $18 million of Arlington Heights, Illinois School District bonds (cover), $52mm State of Michigan General Obligation bonds (cover), $43mm Brookhaven NY and $100mm Ft Worth TX. Looking ahead, the calendar remains elevated at approximately $15.8 billion, including $11.2 billion negotiated and $4.6 billion competitive.

Cabrera will serve as Co-Senior Manager on the City of Chicago’s $1.31 billion General Airport Senior Lien Revenue Bonds and as Co-Manager on the Texas Transportation Commission’s $723 million General Obligation Mobility Fund & Refunding Bonds. The three largest transactions on this week’s calendar include the following:

  • $1.35 billion Salt River Project Agricultural Improvement & Power District Electric System Revenue Bonds

  • $1.31 billion City of Chicago General Airport Senior Lien Revenue Bonds

  • $723 million Texas Transportation Commission General Obligation Mobility Fund & Refunding Bonds

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