8th September 2026

Municipal market update

Last week, the municipal market came under pressure as heavy new-issue supply, persistent inflation, and stronger-than-expected nonfarm payrolls pushed yields higher.

SMA reinvestment needs are also expected to be lighter, at $40 billion versus the $58 billion June–August average.

The 10-year Treasury yield briefly touched a fresh multi-year high Wednesday on inflation and debt concerns, with MMD feeling that pressure too. Yields eased Thursday after Fed Governor Waller signaled a lean toward holding rates steady, before Friday's payrolls beat pushed them higher again. On the week, MMD underperformed Treasuries by roughly 10 basis points across the curve, though both primary and secondary markets stayed orderly as underwriters adjusted scales to reflect the weaker tone. MMD/UST ratios rose to 64%, 73%, and 90% in the 5-, 10-, and 30-year, respectively.

This week's economic calendar is full as PPI, CPI, and University of Michigan sentiment are scheduled to release. PPI is expected to rise 5.3% year-over-year, up from 4.7%, while CPI is expected to come in unchanged at 3.4%. Combined with last week's payrolls beat, these releases have sharpened focus on the Fed's path, with markets pricing a 58% probability of a quarter-point move next week. Higher energy prices are also pressuring yields amid the ongoing Middle East war, with Brent crude around $98 a barrel.

Investors continue to support the municipal market, adding $138 million last week. This marks the 20th consecutive week of inflows this year, bringing the total past $22 billion, but well below the six-week average of $865 million. SMA reinvestment needs are also expected to be lighter, at $40 billion versus the $58 billion June–August average.

Supply is forecast at $17 billion this week despite the holiday shortening, above the $11 billion YTD weekly average, as issuers look to squeeze in deals ahead of the September FOMC meeting. Marquee negotiated deals include the $3.7 billion Alabama Toll Road Revenue Bond, the $1.8 billion City of New York GO Bonds, and the $797 million North Texas Tollway Authority Revenue Bonds — Cabrera is mandated as co-manager on the latter two. In the competitive market, Wisconsin, Minnesota, and Massachusetts are all scheduled to sell, with multiple deals over $200mm.

The three largest transactions on this week’s calendar include the following:

$3.71 billion Alabama Toll Road, Bridge & Tunnel Authority Toll Revenue Bonds & Bond Anticipation Notes
$1.81 billion City of New York General Obligation Bonds
$797.02 million North Texas Tollway Authority System Revenue & Refunding Bonds

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