Municipal Spreads: Muni yields rose for the second week in a row as yields rose by an average of 11.8 basis points with the belly of the curve seeing the largest cuts. We saw yields on 10-year notes rise by 16.6 basis points to end the week at 2.83%. With yields rising this past week munis did underperform Treasuries as the 10-year muni-to-treasury ratio is now yielding 66.09%, compared to 64.34% from the prior week. With yields rising, the muni curve did steepen by 6.2 basis points to end the week at 215 basis points.

According to LSEG Lipper Global U.S. Fund Flows data, we continue to see strong inflows as muni bond funds saw investors add $612 million to muni bonds funds. This follows the prior week’s inflow of $1.4 billion and marks the sixteenth straight weeks of inflows.

The municipal bond market continued the sell-off this past week with yields rising by 6-17 basis points from the 2 to 30 year maturity range this past week. The belly of the curve saw the largest cuts with an average cut of about 16.1 basis points. This selloff followed the sharp selloff in US Treasuries driven by rising inflation expectations and geopolitical tensions that pushed oil prices sharply higher. Munis return moved lower as returns for the month pushed deeper into the red with returns now at -1.44% for the month and year-to-date returns now at .73%.

With munis trading weaker this past week, munis continued to underperform Treasuries as the muni-to-Treasury ratios moved higher across the curve. With munis cheapening versus Treasuries this past week amid rate volatility, AAA muni-to-Treasury ratios were widening across the curve as muni yields moved higher alongside the Treasury selloff. Ratios ended the week around 59% for 2-years, 61% for 5-years, 66% for 10-years, and roughly 89% in 30-years.