MuniStreet: Monday June 1, 2026

Municipal Summary

Municipals improved last week on better volumes, fund flows and participant sentiment. Fundamentals and a steady/stronger Treasury curve helped too, noting: 1) a downward GDP revision, 2) lower personal income, 3) lower savings rates in the US, suggesting consumers continue to spend down savings to pay for higher priced gas/goods/services, 4) Iran progress bringing down oil prices, and perhaps most importantly, 5) steadily improving Treasury auctions — from Tuesday's mediocre 2yr to Thursday's solid 7yr — which provided enough stability/strength to "cover" tax-exempt yield bumps. And with the drumbeat of "value" and "strong entry points" being touted by street and media outlets, retail has become much more comfortable pursuing higher yields (despite recent spikes in daily price volatility), while institutional flows have begun to chase better total return prospects ahead of what many hope to be a supportive seasonal summer reinvestment period.

Yields/Ratios/Term Spreads

Week over week, municipal benchmark yields improved 12-18 bps, cross-market levels fell 1-2 ratios (with standard deviations showing neutral — not rich or cheap) and term spreads narrowed out long but widened up front.

Trading

Net customer buying was positive the majority of the short week, with Thursday's ~$353K average trade size running above the YTD average of ~$300K; reflecting improved institutional demand with price gains and positive momentum.

Price Deviations

Price deviations — measuring the speed and magnitude of investment-grade index adjustment — crossed back to positive after last week’s gains. Still, conditions read neutral (i.e., neither overbought or oversold).

Price Distributions

Still ~66% of 2026’s sessions have finished unchanged — above the 60% long-term average. A greater number of small-loss and large-gain sessions are expected over the near-term should means revert.

Volatility

Municipal yield volatility remained elevated, with 5yr annualized vol near ~47bps as the rolling 20-day window continues to capture early-May's sessions. The measure is expected to decline over the next few weeks as those readings roll off — assuming large price losses are avoided in early June.

Fund & ETF Flows

Lipper reported +$2.3B in total flows for the May 27 week — with Long (+$1.6B) and Intermediate (+$551M) leading — the strongest weekly total in months and the fifth consecutive positive week. Municipals ETFs also great AUM >$2B last week, with more than half the total going to MUB and VTEB. Meanwhile, tax-exempt money market fund AUM declined ~$2B, reflecting some rotation into longer strategies last week.

Secondary Selling Pressure

Bids-wanted volume averaged near $892M for the week — below the 20-day rolling average of ~$949M — with a light Friday close of ~$630M, consistent with easing selling pressure and improving market tone heading into a seasonally supportive June.

Momentum

All three momentum signals — short, intermediate, and long — flipped from negative to positive by Wednesday, having spent most of May negative. The recovery to uniformly positive momentum should support more offensive positioning in the weeks ahead.

Seasonals

May's MTD total return of approximately +0.37% through May 29 recovered from its earlier loss but still trails the month's historical average of +0.71%. June's seasonal bias is neutral-to-positive, and the market is entering it with improving momentum, easing selling pressure and a rising reinvestment calendar.

Supply

$9.4B priced last week — below the YTD weekly average of ~$10.9B — but still bringing YTD issuance to a record ~$238B through May. Forward visible supply this morning has also climbed to >$21B, the highest in 7 months and nearly 40% above the prior 3 year average. Recall, June is historically the second highest issuance month of the year.

Deal Table

Reinvestment

Expected 30-day reinvestment totals climbed to ~$35B this morning — near the average of the last 3 years in June’s first week.

Credit Spreads

Credit spreads held steady last week; Baa-AAA closed at ~95bps (−1bp WoW) and HY-AAA at ~173bps (+2bp WoW) — so a steady reading consistent with the week's improving tone and without meaningful credit development.

Macro/Rate Summary

Q1 GDP revised down to 1.6% from 2.0% on weaker consumer spending and inventories; private domestic final sales revised down 10bps to 2.4%.
April personal income growth stalled; real disposable income fell for third consecutive month; savings rate fell to secularly low levels.
Core PCE +0.24% month-over-month in April, softer than expected; trimmed-mean and median PCE moderated; core services PCE eased, partially offset by housing and goods.
Durable goods orders surged on volatile aircraft and largest jump in fabricated metals since Dec 2021; defense capital goods 2nd-highest on record; core capital goods orders ex-defense/aircraft fell 1.1%.
Initial claims ticked up to 215K; 4-week moving average remained low.
New home sales fell more than expected to 622K on higher mortgage rates; inventory elevated.
Atlanta Fed GDPNow tracking Q2 GDP at 3.8% (down from 4.3% on May 21).
US-Iran tentative deal: 60-day ceasefire extension, reopen Hormuz shipping, ease some restrictions; awaits Trump approval and Tehran finalization.
US leveraged loan issuance rebounded sharply in May.
US crude oil inventories (including SPR) at lowest level since January 2025.
Wells Fargo NFP precap: 105K, unemployment to 4.4%; ISM manufacturing ~52.5, services to 53.4 — prices paid the key signal.
Barclays NFP precap: 75K (consensus 93K), unemployment unchanged 4.3%; Fed remains poised for extended hold.
BAML: 5Y Treasury yield must fall below 3.25% to stabilize US debt interest costs; 30Y Treasury -54% peak-to-trough in 2020s — worst-performing asset.
BMO: summer seasonals favor bonds — since 1990, 10Y declined avg 18bps from June to August (bulk in August); likes selling 10s in 4.30-4.40% zone but would chase a selloff if Hormuz reopening unlikely by summer's end.
DB raised 10Y target to 4.70% (from 4.45%) on higher neutral rate assumption; sees risks tilted toward a Fed hike in line with market pricing; still bullish swap spread wideners.
DB: 82% of PCE basket running hotter than 2018 (the last 2% period); even with energy fade, breadth of inflation limits Fed scope to resume cuts.
Morgan Stanley: stopped out of 5Y duration overweight but maintains strategic view of lower yields; IG corporate supply >$1tn YTD (~$300bn above 2023-25 average) added rate pressure; June-August issuance seasonally drops, easing hedging flows.

Tripp Kaiser, CFA, is the founder of MUNISTREET, Executive Director of the Center on Municipal Capital Markets, and a professor of practice at the LBJ School of Public Affairs at the University of Texas at Austin.