Munis started the week with surging yields, as U.S. Treasuries cheapened and equities ended lower.
Muni yields rose 10 to 15 basis points, depending on the scale. Ten-year muni-UST ratios are around 80%. UST yields weakened by six to seven basis points.
The end of September, which is also the end of the fiscal quarter, is historically volatile, according to James Pruskowski, managing director at Hennion & Walsh. That volatility, driven by shoring up unsettled positions and balance sheets, is exacerbating yields' upward climb in both munis and Treasuries.
"The market today, at least from a benchmark perspective, is trying to make room for a concession in case outflows continue, supply doesn't subside and the volatility in rates continues," Pruskowski said.
Market participants are also preparing for "statement shock" that retail investors may experience at the end of the quarter. "Today's big move, in addition to last week's, is in part making concession that if there's a negative reaction, the market can absorb some of that selling pressure."
