Municipal Spreads: Muni yields rose this past week rose by an average of 7.5 basis points across the curve with the front end seeing the largest cuts with 10-year notes rising by 9.1 basis points to 2.95%. With munis seeing cuts across the curve this past week, we did see munis underperform as the 10-year muni-to-Treasury ratio is now yielding 67.42% compared to 66.52% from the prior week. We did see the muni curve flatten over the past week by 7.6 basis points to end the week at 192 basis points.

According to LSEG Lipper Global U.S. Fund Flows data, muni bond funds saw investors add approximately $615 million to muni bond funds this past week. This follows prior week’s inflow of $1 billion.

Munis were weaker this week as the events in the Middle-East continue to drive the markets, as well as the Fed stating this past week that rates will stay at their current levels for the long term instead of the cuts that were expected at the beginning of the year. At the start of the year, the expectation was to see 3 cuts over the year, to two later in the year, to now where it is expected that the Fed will not cut rate at all in 2026. This pushed yields higher with front end seeing the largest cuts, as the 2026-2031 maturities seeing 11-14 basis point cut, the 2032-2036 seeing 9-10 basis point cut and the 2037-2056 seeing a 5-7 basis point cut.

Despite the weaker tone in the final two weeks of the month, April showed the best returns for munis since 2014, notching a return of 1.15% for the month. This strong April performance, a much needed boost for the markets as March saw declines of 2.3% as war in Iran fueled volatility and geopolitical uncertainty.