Municipal Spreads: Munis saw cuts again this week with the curve seeing an average of about 6.2 basis points across the curve with yields on 10-year notes rising by 6.9 basis points to end the week at 3.11%. With the sharp rise in yields this past week, munis did underperform Treasuries over the past week as the 10-year muni-to-Treasury ratio in now yielding 68.19%, compared to 66.19% from the prior week. We did see the muni curve steepen slightly over the past week by .7 basis points to 195 basis points.

Muni bond funds continue to see positive fund flows as muni bond funds saw investors add about $1.5 billion to muni bond funds this past week. This follows prior week’s inflow of $1.3 billion according to LSEG Lipper Global U.S. Funds Flows Data. This is the fourth time in five weeks in which inflows were above $1 billion and the sixth straight weeks of inflows.

Munis continued to feel pressure this week as Treasury yields continued to rise and munis followed suit as inflation continues to be a concern for investors, impacting the broader fixed income markets overall as a result. We saw muni yields rise by an average of 6.2 basis points across the curve with the 2027-2039 maturities seeing a 6.8-basis point cut, the 2040-2049 maturities seeing a 5-6 basis point cut, and the 2050-2056 maturities seeing an 6-7 basis point cut. With the cuts this week, returns for the month dipped lower to -.65%, bringing total returns for the year to .31%. The long end is seeing the worst returns this month with returns of -.98% while the 1–2-year range is basically flat for the month.