Munis were weaker on Wednesday in response to President Donald Trump rejecting Iran's offer to reopen the Strait of Hormuz. U. S. Treasuries cheapened, with the largest losses at the front of the curve, and equities ended mixed.
Muni yields were cut one to six basis points, while UST yields rose five to 10 basis points, pushing the 30-year UST just shy of 5%. The last time the 30-year UST was above 5% was July 17.
"The market is starting to feel a little bit on the heavy side," said Jamie Iselin, head of municipal fixed income at Neuberger Berman. "The Treasury market has been leaking higher as, I think, people are getting concerned that the conflict in the Middle East is going to [last] longer."
The muni market will have to work through the heavier market in the next few weeks, as supply looks to be more robust, Iselin added, and he expects the higher yields at the front of the curve to persist.
ICI reports
The Investment Company Institute Wednesday reported inflows of $1.527 billion for the week ending April 22, following $300 million of outflows the previous week.
Exchange-traded funds saw inflows of $1.144 billion after $65 million of outflows the week prior, per ICI data.
New-issue market
In the primary market Wednesday, BofA Securities priced for the Iowa Finance Authority (Aaa/AAA/AAA/) $279.085 million of green state revolving fund revenue bonds. The first tranche, $249.945 million of Series 2026A bonds, saw 5s of 8/2027 at 2.52%, 5s of 2031 at 2.70%, and 5s of 2036 at 3.17%, callable 5/2036.
The second tranche, $29.14 million of Series 2026B taxable bonds saw all bonds price at par: 4.008s of 8/2028, 4.192s of 2031, and 4.367s of 2032, noncall.
FOMC
The
Three of them preferred removing the easing bias in the statement.
Powell said he will stay on as governor once his term as chair ends on May 15, about a month before the June FOMC meeting
Cleveland Fed President Beth M. Hammack, Minneapolis' Neel Kashkari, and Dallas' Lorie K. Logan "supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time," the post-meeting statement said.
"Bond yields moved slightly higher following the statement, reinforcing our view that income — not price appreciation — will be the primary driver of fixed‑income returns in 2026," said Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute.
"The three dissents in favor of removing the bias towards easing are the most concrete reason to think Kevin Warsh's relatively dovish perspective won't shift enough FOMC participants to favor rate cuts anytime soon," said Will Compernolle, macro strategist at FHN Financial. "We still think there's a high hurdle for the next Fed move to be a rate hike."
"For investors, the key message is that the path to lower rates is likely to be slower and less predictable than markets once hoped," said Richard Flax, chief investment officer at Moneyfarm.
In his press conference, Powell said he will keep a low profile as a Fed governor and stay until he thinks it's appropriate to leave.
Josh Jamner, senior investment strategy analyst at ClearBridge Investments, said Powell remaining on the board means there won't be a shift in balance between doves and hawks on the panel.
Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni said of the dissents, "Clearly, there are growing concerns regarding the inflation risk in this environment."
The dissents suggest Warsh will have a difficult time if he tries to lower rates soon, said Gary Pzegeo, CIO of CIBC Private Wealth US. "Additionally, Powell's decision to stay on as a governor introduces another potential source of resistance against Warsh and Trump within the Fed."
