Municipal Spreads: This past week, munis yields saw a slight cut across the curve with yields rising by an average of 1.5 basis points across the curve with yields on 10-year notes rising by 2.1 basis points to end the week at 2.74%. With the cuts to muni yields this past week, munis did underperform Treasuries as the 10-year muni-to-Treasury ratio is now yielding 67.47%, compared to 65.58% from the prior week. The muni curve did steepen over the past week by 2.4 basis points to end the week at 163 basis points.

According to LSEG Lipper Global U.S. Fund Flows data, investors pulled roughly $966 million from municipal bond funds last week. This follows the prior week’s inflow of $405 million. This outflow marks the largest outflow since April and the first outflow of funds in eight weeks.

Munis were relatively quiet this past week as we start to see economic data flow through since the government shutdown is over. With the September employment number coming in at 4.4% and nonfarm payroll numbers coming in at 119k, giving us mixed signals, a December rate cut is still in play. The third week of November saw muni yields rise by 1-2 basis points across the curve with the 2026-2035 maturities seeing a 2 basis point cut, 2036-2043 maturities seeing 1 basis points cut, and the 2044-2056 maturities seeing a 2 basis point cut. The rise in yields has pushed November returns slightly lower .8% for the month and our year-to-date returns of 4%. With just one week left in November which will be only have 4 trading days due to the Thanksgiving Holiday, we shouldn’t expect too much activity with munis.