MuniStreet: Tuesday May 26, 2026

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

It was a good session on Friday heading into the long weekend: US equities posted another week of gains, rates were better bid and oil steadied. Meanwhile, fundamentally: consumer sentiment data fell below survey, inflation expectations rose, there was a hint of progress in Iran, and Warsh was sworn in as new Fed chair just as markets fully priced in a rate hike by December. So there was much to contend with; although Iran negotiations appear to be the key driver of price action, and it has been argued that equity markets may be either too hopeful (i.e., for a resolution) or too tolerant (i.e., should rates remain high and/or inflation climb). 

Tax-exempts were also better-bid on Friday: block trades were stronger across maturities and credits, offerings were bumped, benchmark yields were lowered 1-2 bps and MUB closed with a small gain. Importantly, though, Friday's adjustment did not change current conditions much, noting: 1) price momentum is still negative across the curve, 2) ratios are only a touch above their last 3-month and YTD averages, 3) May's MTD loss of -0.70% is still well below the month's seasonal average (i.e., and in the context of negligible IG returns YTD, will do little to encourage trend-following TRR behavior), and 4) daily price volatility is still probably higher than retail would like.

But, again, despite the weaker current context, municipal market activity has been orderly: selling pressure and dealers balances are manageable, fund/ETF flows have been positive and primary market distribution, while discriminant, has still been distributed at reasonable prices (i.e., of note here is the +20 bps cut between the $772M OK Arena Sales Tax deal's premarketing and final pricing wire — which was a larger adjustment, but one that enabled distribution). In other words, while there is still plenty of uncertainty and reason to position less aggressively ahead of the summer, there is also no evidence of a breakdown in market function, market access or going-away distribution.   

Cross market levels climbed ~2 ratios outside the 5yr maturity last week, with the 10yr and 30yr now reading +1.50 to +2.50 standard deviations “cheap” vs. recent levels. Perhaps the latter is enough for crossovers to add to Friday’s stability — although ratios are still not much higher than their trailing 3 month averages. Meanwhile, term spreads were little changed last week but are flatter over the last 1 and 2-months.

Net customer buying activity was positive all week, with Thursday's ~$423K average trade size running ~40% above the YTD average; suggesting institutional demand picked up as prices cheapened mid-to-late week. Overall volumes were stronger and bounced nicely above their YTD averages.

Price deviations — measuring the speed and magnitude of investment-grade price changes — drifted to −0.64% by Friday; reflecting the week's losses but not a technical oversold condition.

2026's daily price movement shows 68% of sessions unchanged — above the long-term average of 60% — although the gap is closing. Mean reversion suggests more activity is expected in the moderate negative and strong positive buckets.

Municipal rolling yield volatility has continued to climb, with 20-day annualized vol at the 5yr maturity rising from ~32bps to ~42bps last week, and moving back toward Aprils high. Volatility at these levels does reinforce some concessionary behavior in the primary market even with dealer balances under control.

Lipper reported +$1.5B in total flows for the May 20 week — with Long (+$994M) and Intermediate (+$390M) leading — marking a fourth consecutive positive week. Tax-exempt MMF AUM steadied at ~$150B as SIFMA fell sharply to 1.64%; suggesting earlier rotations into cash have been sticky, but new dollars have extended out the curve.

Bids-wanted volume averaged near $986M on a 20-day rolling basis, with mid-week prints running $1.2–1.3B before closing light Friday — still within a normal range and not suggestive of concerning sell-pressure.

All three momentum signals — short, intermediate, and long — are opening the week negative, having remained negative throughout May. The negative trend has inhibited participant conviction heading into an otherwise strong summer reinvestment period.

May's MTD total return of -0.70% through May 22 continues to defy the month's historical positive bias (+0.71% average since 2010, positive 12 of 16 years).

30-day forward supply is half what it was this time last year, and has come down ~80% over the last week. Still, YTD issuance is running at a record $228B pace, which is ~$20B above last year's total at Memorial Day.

30-day ahead reinvestment expectations are still hovering in the mid-$20B — a high total but also below last year's estimates at Memorial Day. 

Credit spreads tightened a touch last week, but not by enough to suggest a developing credit story. Rather, and as is often the case, high-grades were pressured more than HY during a period of weakness amid greater high-grade volumes and price discovery.

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.