Municipal Summary
Municipals steadied again today on light volumes (~10 below Friday average) and a range-bound Treasury curve; the latter being better bid up front, but not by enough to nudge an otherwise distracted (i.e., by the week’s strong equity advance) tax-exempt market. Looking ahead, next weeks $9.2B calendar is ~10% below the weekly average over the last 35 weeks - a constructive technical heading into a seasonally strong period.
Secondary Breaks (4/9-4/23 data only)
General: Over the last 10 sessions (4/9–4/23), secondary breaks averaged -1 bp through originals across 531 trades, with 65% of bonds breaking to lower yields.
Offering type: Negotiated deals broke -1.5 bps through originals vs. -0.5 bps for competitive sales. The 1 bps difference is tighter than the long-term difference of ~4 bps; where negotiated deals have averaged ~4 to 5 bps through originals.
Maturity: Short maturities (2027–2029) were mixed while intermediates and longs broke more consistently to lower yields. The 2032–2042 range averaged -2 to -3 bps through originals, reflecting a bit more primary market concession to clear longer duration amid the absence of strong mutual fund inflows.
Sector: K-12 education (-4 bps), general obligation (-3 bps), and health care (-2 bps) names saw the largest break disparities, while Transportation (+1 bps) and higher-ed (+3 bps) broke to higher yields vs. originals.
Rating: Results varied meaningfully this period, especially among the high-quality buckets. There was a bit more consistency among lower-rated and HY names breaking to lower yields - but the week’s activity was more mixed vs. longer-term expectations.
Coupon: 5.50% coupons broke -4 bps through originals while 4.00% coupons broke +5 bps to higher yields; meaning, reasonably, premium structures saw stronger follow-on demand while discount/par structures faced some relative resistance.
Deal size: The $100M to $500M deals broke approximately -1 bps through originals, while deals >$1B broke by -3 bps; so larger disparities on the largest transactions, consistent with having to move more par through mostly retail/SMA distribution.
Deal Table
Next week’s calendar is expected to total $9.2B, down from $13.3B this past week.
Macro/Rate Summary
Initial jobless claims edged up but remained near a 2-year low; NY spring break drove a 10K jump; 4-week average low and WARN filings low → limited layoffs in pipeline.
Manufacturing PMI hit near 4-year high, but driven by "panic/emergency" safety-stock buying ahead of supply shortages; services PMI back in expansion but 2nd-weakest in a year.
Input cost inflation accelerated to an 11-month high.
Kansas City Fed composite manufacturing index slipped but solid; price pressure surged.
Chicago Fed National Activity Index negative in March (below-trend growth); Goldman's activity indicator still shows solid growth through April.
Top earners continue to dominate overall consumer spending (Oaktree).
10Y Treasury holding above its 200-day moving average — potential breakout setup.
Fixed-income yields now exceed US inflation and well above S&P 500's 1.2% dividend yield.
Software loan maturity wall pushed out to 2028+.
~20% of US private loans carry PIK optionality; more than half have exercised it (Oaktree).
Analysts raised EPS forecasts for every quarter of 2026; forward EPS growth accelerating.
Nearly all US equity valuation metrics 2+ std dev above long-term mean; US trading at 41% premium to rest of world.
AAII bull-bear spread turned positive first time since mid-February; active manager US equity exposure highest since January.
Dallas Fed Q1 energy survey: only 20% expect Strait of Hormuz normalization by May '26, 39% by August, 26% by November, 14% later.
Natural gas inventory build larger than expected, stocks above 5-year average; prices lowest since October 2024.
Copper/gold ratio showing improving long-term momentum.
20Y auction stopped through when-issued by 0.9bps at 4.883% (highest since last July); above-average foreign demand.
Warsh Senate hearing: affirmed Fed independence but wants to end forward guidance, SEP/Dot Plot, and routine press conferences; called FAIT a "fatal policy error"; prefers trimmed-mean/median inflation measures over PCE — goalpost-shift risk.
ABN AMRO: two supply shocks, one inflation problem; Fed looks through energy shock, resumes 25bp/quarter easing by year-end to 3.00% by June '27.
BMO: range-break unlikely into the weekend; claims is the only relevant print, with added marginal weight as it covers NFP survey week.
MS Cross-Asset: Market Sentiment Indicator flipped negative (risk-off) after holding positive since 3/24; still equal-weight US equities 12M but trimmed global equity allocation.
Apollo (Slok): higher inflation regimes historically produce weaker returns in S&P, IG, and HY.