Municipal Spreads: Muni yields rose once again this past week as yields rose by an average of 12.6 basis points across the curve, with the front-end seeing the largest cuts as 10-year notes experienced cuts of 15.7 basis points to end the week at 3.13%. Munis continue to underperform Treasuries as the 10-year muni-to-Treasury ratio is now yielding 70.61%, compared to 67.84% from the prior week. We did see the muni curve flatten this past week by 3.8 basis points to end the week at 209 basis points.

According to LSEG Lipper Global U.S. Fund Flows data, muni bond funds saw their first outflow in seventeen weeks as investors pulled about $600 million from muni bond funds last week as concerns grow in regard to the economy, inflation and geopolitical turmoil. This follows prior week’s inflow of $1.8 billion.

Munis continued to trade weaker this past week, as the volatility in Treasuries, persistent inflation concerns, along with geopolitical concerns pushed yields higher and ratios wider. The majority of the cuts were made in the belly of the curve as yields on 10-year notes have risen 15.2 basis points since last week to end the week at 3.11 and have by 59 basis point since the start of the month. This has pushed month-to-date returns to -2.72% and year-to-date returns to -.58%. This week, we saw yields on 10-yer notes rise above 3% for the first time since September 2025.

Munis continue to cheapen versus Treasuries as the 10-year ratio moved notably higher as the 10-year moved above 70% for the first time September 2025. The cheapening was most pronounced in the intermediate range, with 5–10-year ratios widening the most and approaching more attractive entry points for crossover buyers. The 30-year maturity range continues to be the cheapest part of the curve with the ratio above 91%, the cheapest level since October 2025. The move reflected macro-driven pressure rather than any deterioration in credit, reinforcing the relative value opportunity that developed over the course of the week.