MUNISTREET: Tuesday May 12, 2026

Municipals held steady yesterday on average volumes. US equities crept higher and Treasuries held to a tight-but-weaker range. Geopolitical uncertainty has continued to drive price action for fixed-income, contributing to weaker index adjustments and poor auction results (i.e., noting yesterday's weak 3yr UST sale). Fundamentally, there is also CPI, PPI and the Trump-Xi meeting on the near-term calendar — each able to shift sentiment on its own, but likely not to the degree of meaningful development in Iran. The 10yr and 30yr Treasury auctions offer another test of demand for US rates this week, but those sales have struggled since the conflict began (Fig. 1). Furthermore, participant conviction remains low, and auction timing is not ideal given: 1) the coinciding consumer/producer price inflation data, and 2) larger US IG corporate borrowing competing for attention.

For the municipal market — which remains in a mostly neutral technical condition — range-bound trading is still the best argued; at least until there is greater fundamental clarity. In the meantime, participants are content to focus on risk management and placement of a record primary calendar. Deal subscription levels, competitive bidding, secondary break activity and average trade sizes have all suggested issuance has been well received, assisted by better/stronger institutional demand. SMA's have also remained engaged at ~5.0% taxable equivalent yields and have continued to position portfolios ahead of the summer reinvestment. But momentum is not positive, supply is heavy, and more dollars have flowed into shorter duration; meaning activity and sentiment are still cautious. Participants recognize the real risk of higher nominals and the possibility that 2Q26 total return losses will disappoint what are otherwise strong seasonal expectations (Fig. 2).  

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.