Monday: April 13, 2026

Municipal Summary | Macro/Rate Summary | Yields/Ratios/Term Spreads | Trading | Price Deviations | Price Distributions | Volatility | Fund & ETF Flows | Secondary Selling Pressure | Momentum | Seasonals | Supply | Deal Table | Reinvestment | Credit Spreads

The tariff pause on Wednesday (4/8) gave the municipal market its best single session of the year — AAA yields rallied 8-10bps intraday, with the 10-year closing the week near 2.89%, down 12-13bps week-over-week. Short and intermediate maturities led the move, consistent with strong SMA engagement at the bid. Customer-bought-to-sold ratios held above 1.0 through most of the week as retail remained engaged, ETF flows were constructive ($765M for the week ending 4/5), and price momentum — now positive across short, intermediate, and long maturities — has improved near-term market confidence.

Still, adjusting for some technical (but mostly fundamental) support, municipal market conditions remain neutral at best, noting: 1) mutual fund flows turned negative for two consecutive weeks (-$218M, 3/25; -$727M, 4/1), 2) bid-wanted volume spiked to nearly 1.5x its 20-day average mid-week (1,462 vs. ~1,005 on 4/9), and 3) forward supply — now at its highest level of the year — has put dealers in a more defensive posture.

Credit markets have been relatively stable — IG spreads (Baa-AAA: ~101bps, HY-AAA: ~183bps) widened only modestly, consistent with liquidity-driven rather than credit-driven pressure. Supply remains heavy (YTD issuance tracking above prior year), and with reinvestment at a seasonally low point in early April, the technical support available to absorb ongoing outflows is limited. Expect a more concessionary primary market tone this week, particularly as dealers and investors continue to navigate geopolitical uncertainty, tariff ambiguity, and a Federal Reserve firmly on hold. The market is simply not functioning with much conviction.

• Iran talks resuming; China-owned tanker testing Hormuz blockade — diplomacy alive but fragile; oil off intraday highs, still elevated
• USTs calm; 10yr at 4.29%, 2yr at 3.78% — modest Monday rally as oil retreated and negotiation headlines improved; 10yr real yield falling for fifth consecutive day
• NFIB small business optimism fell 3.0 pts in March to 95.8 — 11-month low, below 52-year average; uncertainty index at 92 (historical avg: 68)
• Profit trends fell 11 pts to net -25%; capital outlay plans lowest since November 2009; supply chain disruptions widening (62% affected); actual selling prices: net +25%
• Existing home sales plunged to 3.98M annualized in March (vs. 4.05M expected) — 9-month low; supply hit 10-year high; soft spring selling season despite lower rates
• Data due today: PPI expected +1.2% M/M (vs. +0.7% prior); ADP employment; five Fed speakers
• Kevin Warsh confirmation hearing upcoming — markets watching whether he ties lower rates to balance sheet reduction and AI productivity, not just signals cuts
• Market-implied probability of Fed cut by December: 36%; futures pricing probability-weighted average of many paths, not a consensus base case
• 5Y1Y real yield at 2.39% — highest since 2008-2010; real yields now above Fed equilibrium; TIPS case building amid fiscal dominance risks
• ISM services prices paid at 70.7 (highest since Oct 2022), consistent with 5-6% inflation historically; 1yr inflation swap at 3.17% — notable dislocation
• PCE forecasts raised: headline +3.1% Y/Y by Dec 2026, core +2.5%; risks skewed higher; tax cut boost to growth roughly offset by oil drag
• Bear-flattening dynamic: short yields rising faster than long end on rate cut repricing; ECB now pricing hikes vs. Fed on hold — divergence widening
• Dollar index fell below long-term technical support; cross-asset implied volatility beginning to decline
• Oil retreated on renewed diplomacy hopes; futures curve remains sharply backwardated — market pricing temporary shock; backwardation at similar levels didn't last long in 2022
• Natural gas fell to lowest level since October 2024
• Private credit stress building: global AUM $1.78T; redemption requests surging; funds capping withdrawals at 5% after investors sought to pull ~16% of assets; BDC spreads trading wider than IG and BB HY
• Equities extended rally for seventh consecutive session; Q1 earnings season begins this week — street expects 19% EPS growth; 10 of 11 sectors projected positive; positioning still underweight

AAA benchmark yields rallied sharply on Wednesday (4/8) — the 10yr falling 9bps intraday alone — closing the week at 2.89% and down ~13bps from the prior Friday. The 5yr finished at 2.42% (-11bps WoW) and the 30yr at 4.29% (-11bps), with the steepest decline in the 10-15yr sector. The relative strength in intermediate maturities reflects strong SMA, retail and ETF interest amid higher nominal and taxable equivalent yields. As such, cross market levels also richened, with levels falling 2-3 ratios across the curve MTD. Still, while lower on the month, ratios this week are better characterized as normal vs. greatly distorted. Long-end yields also declined, but less so amid waning mutual fund flows and related demand for duration ahead of a large calendar, persistent inflation concerns and high geopolitical uncertainty. The 2s/30s curve is just 5bps flatter over the last 2 months.

Customer-bought-to-sold ratios held above 1.0 throughout the week, ranging from 1.06 to 1.19, with the strongest buying Monday (1.19x) and Thursday (1.18x). Total daily trade counts ran 73-79K Mon–Thu before a light Friday (59K), and the 5-day trade count remained at or above 350k throughout the week. This, along with declining average trade sizes, matched with greater SMA interest; and reflected either 1) fresh capital allocations, or 2) early May reinvestment as managers realized an opportunity with higher nominal yields. Overall, the net buying pressure was constructive, supportive of lower yields, and reflected opportunistic demand for better income vs. broad rate-market conviction.

Investment-grade (IG) price deviations continued to bounce off their late-March lows last week, closing at the middle of the overbought/oversold range. Wednesday's single-session surge helped meaningfully there. So the current +0.34% reading is well within neutral territory and materially below the +3% level that would otherwise suggest conditions have become overbought. Price movement has simply begun to normalize.

Aside from Wednesday's session, movement was relatively contained last week; but was still weighted toward the middle/right side of the price-change distribution. Through 67 session YTD, the distribution has been relatively normal - which is consistent with the year's limited performance and small yield adjustment. Recall, ~66% of a year's trading sessions typically finish unchanged, and 2026 is running only slightly below that average. At the moment, the distribution argues for greater movement but in a contained range (i.e., more sessions within ±0.25%), which would bring down volatility and improve participant confidence.

Trailing yield volatility remained between 3.5-4.5bps across the curve last week - near YTD highs. Again, to the extent price deviations and distributions normalize (as per above), volatility will come down. But higher volatility in recent weeks has meant: 1) the tone in the primary market has been more concessionary, 2) dealers have positioned more defensively, 3) bid-ask spreads have reasonably widened, and 4) investor sentiment, while improving amid higher yields, has suffered. So despite some better demand and price momentum in recent sessions, there is still plenty of caution underlying the current market context.

Mutual fund flows turned negative for two consecutive weeks and have been trending lower for two months - a meaningful change vs. the $2-$3B of weekly inflows from January and February. Conversely, ETF flows have been more resilient: $765M of inflow were reported for the week ending 4/5, and weekly AUM gains have been strong all year. So while overall mutual fund flows have been a bit more ambivalent lately - perhaps amid NAV losses in March, but also unpredictable macro headlines, data, etc. - ETF flows have steadied and even grown. Note, cumulative ETF inflows this year already exceed most prior full year totals. It is possible that retail has been rotating more from active to passive, and/or have become more price or liquidity sensitive.

Bids-wanted activity spiked sharply mid-week, hitting $1.4B on Wednesday (4/8) and $1.4B again on Thursday (4/9) — both readings roughly ~40% above the 20-day average of ~$1B. However, context matters: the spike coincided with the mid-week rally, suggesting accounts used a stronger bid to either raise cash, reduce duration, or make room for a larger upcoming primary calendar. In other words, it was more about opportunistic selling into strength vs. distressed liquidations/redemptions. Selling pressure did ease Friday but remained above its 20-day moving average. Overall, volumes appeared to be absorbed without much stress.

Price momentum remained positive across the curve last week; with each short, intermediate and long index segment trending above its trailing average. Shorter maturities have taken more time (vs. 10+ years) this month to shift to a positive condition - but are now showing technical strength along with the intermediate and long-end, bolstering near-term confidence ahead of a seasonally ambiguous period.

On average since 2010, April has had a neutral seasonal bias, typically attributed to lower reinvestment (especially early in the month), higher supply and some tax-related selling pressure. In recent years the month has been defined by losses - sometimes near -3.0%; so the MTD total return improvement through last week is contrary to the month’s recent seasonal weakness. Seasonal biases turn much more supportive beginning in May.

YTD issuance reached $144.5B through the week ending 4/10, tracking above last year’s pace. Last week brought $10.0B in new supply (following $6.4B the week prior) which, despite some price volatility, fundamental anxiety and a few delayed sales, appeared generally well received. Looking ahead, visible supply has begun to rebuild (i.e., currently near $20B and ~35% above recent years’ average at this time of year), contributing to some lingering caution and defensive sell-side positioning despite recent positive shifts in momentum, performance and demand activity.

Expected 30-day reinvestment totals are ~$16B this morning — above the comparable levels for 2025 ($15.4B), 2024 ($12.5B), and 2023 ($13.0B) at the same point in the year. However, recall that early April represents a seasonal and calendar year trough, with totals expected to climb meaningfully over the next ~8-10 weeks. The latter has historically supported prices through the late spring and summer months.

Credit spreads were essentially unchanged last week: Baa-AAA spreads closed at 101bps (unch WoW) and the HY-AAA spread closed at 183bps (+2bps WoW). So very little credit movement despite higher rate volatility - a reflection of strong credit quality (or at least a lack of credit deterioration) amid higher levels of geopolitical and economic uncertainty.