Municipal Summary
Municipals stumbled again yesterday — now off 4-6 basis points on the week — as newly negative price momentum has weighed on participant sentiment (Figure 1 & 2). Treasuries yields also moved higher, with the 30-year refunding auction printing weak: it tailed 0.5 basis points and stopped at 5.046%, the highest award rate since 2007, with bid-to-cover at a six-month low. Indirect takedown ran above average, but stats still did not reflect strong enough appetite for Treasury long-bonds above 5.0%. The 30-year has only closed above 5.0% on a handful of days in recent years, and some are now questioning whether the market still sees 5% as psychological support on the long end (Figure 3).
Tax-exempts held to a narrow range despite benchmark cuts. Lower average volumes likely constrained price discovery, although plenty of block trades printed at weaker levels — NYC TFAs, NYC GOs, Delaware GOs, and Washington GOs all traded 2-5 basis points weaker versus Tuesday — suggesting benchmarks may be lagging more meaningful weakness in the secondary. Either way, sentiment has clearly turned more negative and will stay that way as long as technical support levels are breaking, supply remains heavy, most institutional accounts stay sidelined, and SMAs grow more discerning about the effect of inflation and oil on fixed income allocations.
Figure 1, www.munistreetresearch.com
Figure 2, www.munistreetresearch.com
Figure 3, www.munistreetresearch.com
Key Fundamentals
Headline and core CPI accelerated YoY in April; core jumped month-over-month, topping expectations.
Gasoline prices +5.4% month-over-month (boosting headline by 0.4pp); food prices rebounded sharply; ground beef topped $7/lb for first time.
Core goods inflation muted as tariff pass-through winds down; core services surged on airline fares and video/audio services (Netflix price hike).
Shelter inflation surged on a statistical catch-up — BLS rezeroed indexes during government shutdown; Oxford Economics flags as one-time, no bearing on future housing inflation.
Trimmed mean and median CPI inflation also elevated.
Bonds reacted hawkishly across the curve; fed funds futures pricing in some tightening this year.
Real wages now negative for the first time in three years — inflation outpacing wage gains.
NFIB Small Business Optimism roughly unchanged; sales slumped, price plans reaccelerated, wage plans fell sharply, uncertainty declined; survey reliability questionable due to collapsing sample size (Pantheon).
Household debt to GDP fell further in Q1 (NY Fed); transitions into serious delinquency improved for student loans, accelerated slightly for mortgages.
ADP: private employers added an average of 33K jobs per week during the four weeks ending April 25.
Redbook same-store sales jumped to highest level since late 2022.
Bank of America card data: spending per household +4.8% YoY in April, strongest in three years; ex-gasoline also at three-year high.
German 10Y yield rose to highest level since May 2011.
Hungary unexpectedly cut implied rate on FX-swap facility from 5.75% to 5.25%; forint weakened.
Japan bank lending accelerated in April at fastest pace in over five years.
US Treasury yields at highest level since mid-2025 across the curve.
10Y approaching 4.50% — a level that has historically been problematic for stocks in this bull market (Kantro).
KKR Regime Change Thesis: higher volatility, stickier inflation, more government spending, capital dislocation; bonds less reliable as equity shock absorbers.
Japanese investors sold a net ¥4.67 trillion ($29.6bn) of US sovereign-related debt in Q1 — largest outflow since 2022.
Duration extension not always rewarded since 1960: 7-20 year bonds yielded lower returns than 5-7 year with more volatility.
Leveraged loan defaults and distressed exchanges have eased (Apollo).
LME copper rallied above $14,000/ton on global mine disruptions, sulfur shortages, and resilient Chinese demand; Comex-LME premium widened on expected US tariffs on refined copper.
US venture valuations reached a record $9.4 trillion in Q1 2026, with half the total value from AI (PitchBook); US venture secondary market hit annualized $112.2bn, surpassing public listings for first time.
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.