Jessica Lerner

"The discussion about policies regarding tariffs will drive performance in bonds over the next three to six months," said Michael Pietronico, CEO of Miller Tabak Asset Management.

Triple-A muni yields plummeted up to 50 basis points Thursday in a dramatic reversal from the week's earlier collapse. Speaking live at The Bond Buyer's Texas Public Finance event, market leaders painted a picture of extreme volatility, impaired liquidity, and an uncertain path forward.

"The equity market is looking at this more positively, but bonds are still thinking, 'Well, these tariffs still have to be resolved,'" said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital.

Municipal AAA yield curves were cut up to another 42 basis points, depending on the curve, as of noon, pushing yields to multi-year highs and long-end muni to UST ratios above 100%. Muni yields have risen up to nearly 100 basis points in spots since the bond market rout began.

Weakness in the muni market has been partly amplified by ETF selling; high-grade yields rose more than 60 basis points on parts of the curve over two sessions.

"The changing momentum on what the market is looking for on tariffs and the volatility in the equity market is spilling over into the Treasury market, and munis can only fight the Treasury market for so long," said Pat Luby, head of municipal strategy at CreditSights.

"In the aftermath of this week's Treasury yield move lower, MMD-UST ratios have reached short-term highs," Barclays strategists said.

"With the initial announcement proving to be more aggressive than expected, the market responded overwhelmingly negatively," said Principal Asset's Seema Shah.

At noon Thursday, muni yields had been bumped up to 12 basis points, depending on the curve, while UST yields rallied, with yields falling 13 basis points on the short-end.

Parity Plus gives muni issuers increased transparency and resources to determine market demand prior to a bond sale.

Details surrounding the tariffs — which could be anything from reciprocal tariffs to finally implementing delayed tariffs on Canada and Mexico and on pharmaceuticals — have remained unclear, but uncertainty has plagued the market for weeks.

Triple-A yields have fallen as much as 12 basis points over the past three trading sessions.

The asset class extended its selloff last week as concerns regarding the tax-exempt status of munis continued to mount, combined with a heavy new-issue calendar and tax season selling by investors, said Jason Wong, vice president of municipals at AmeriVet Securities.

"It seems like hitting last year's volumes should be within the strike zone for the marketplace," said Kyle Javes, a managing director and head of municipal fixed income at Piper Sandler.

Issuance for the week of March 31 is at $9.29 billion, with $8.011 billion of negotiated deals and $1.28 billion of competitive deals on tap.

These institutions will see increased usage if some threats to the market come to fruition.

Following Wednesday's selloff, muni yields were cut even further, with yields rising up to six basis points, depending on the scale. Meanwhile, UST yields rose two basis points out long.

The departures happened around the time Barclays handed out companywide bonuses and coincided with the firm in the process of shrinking its muni footprint in the regions, according to sources.

"We're navigating a crosscurrent of macro risks — tariffs, tax policy proposals, DOGE cuts, and evolving economic data — layered on top of a broader risk-off tone," said James Pruskowski, CIO of 16Rock Asset Management.

What's happening to the muni market is the "confluence of modest selling (via fund outflows and retail perhaps pausing during tax season); a heavy new issue calendar; and very thin near-term reinvestment expectations," said Matt Fabian, a partner at Municipal Market Analytics.