Finance

There is a positive view of the muni market in the long-term due to a mix of attractive tax-adjusted yields and a generally favorable credit backdrop, said Cooper Howard, director of fixed income research and strategy at Charles Schwab.

While broader economic risks remain, market dynamics are being driven by supply, demand and income generation, rather than macro headlines, said Pat Haskell, head of the municipal bond group at BlackRock.

Federal Reserve Gov. Lisa Cook said AI could boost productivity, but warned the transition may raise unemployment and force difficult tradeoffs between inflation and jobs.

Appeals challenging authorization for $1.45 billion of ratepayer-backed bonds sold in the wake of a 2021 winter storm are in the hands of the high court.

Federal Reserve Bank of Chicago President Austan Goolsbee said the central bank should focus on getting inflation to its 2% target before making any additional cuts to short-term interest rates.

"Trump indicated the administration will implement additional tariffs under different authorities, and we expect the aggregate effective tariff rate to ultimately settle around 13%, largely unchanged from current levels," Nuveen strategists said.

Federal Reserve Gov. Christopher Waller said during an appearance Monday his decision on whether or not to support a cut to short-term interest rates depends on labor market indicators.

The Bond Buyer's 2026 Predictions Report shows professionals expect growth for the year ahead, but are cautious about changes coming to the central bank.

Bond markets believed Trump would likely keep tariffs in place in some form — even before the president made his announcement later in the afternoon — which partly explains their muted response throughout the day.

While near-term uncertainty is inevitable, the court's decision should be accretive to growth expectations and somewhat disinflationary.

This is the sixth time in seven weeks that inflows have topped $1 billion.

"For 2026, we expect municipal bonds to remain compelling as reinvestment demand stays strong and rate normalization progresses," said Brian Barney, municipal portfolio manager at Parametric.

Following this week, the pace of issuance should pick up, Birch Creek strategists said.

The precedent and, if there were to be an appeals court affirmation, would have a greater impact on Louisiana than Florida, the attorneys said.

Underwriting spreads rose to $4.30 in 2025 from $4.23 in 2024.

The rating agency, which also put the bonds on CreditWatch Negative, cited weakening liquidity and aging assets. 

"Unsurprisingly, the market is taking these numbers in stride, with the bond market only slightly higher after a large rally over the last couple of days due to the equity market sell-off," said John Kerschner, global head of securitized products and portfolio manager at Janus Henderson Investors.

A California Department of Water Resources issuance, based on a resolution extending contracts with water agency customers, drew strong demand.

Currently, munis are largely operating "in their own world" — ignoring rich valuations and upcoming supply, said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital, in a report.

"The bond market marked down the odds of rate cuts after the release," said FHN Financial Chief Economist Chris Low. "The fact long yields are still lower than two days ago suggests traders are skeptical of the quality of the employment data but are confident the Fed will use it as a reason to keep rates steady," he said.