A global bond rout, driven by rising oil prices that intensified inflation concerns and increased expectations of the Federal Reserve hiking interest rates, pushed U.S. Treasury yields higher, which, in turn, led to a selloff in munis.
Refinitiv MMD's scale was cut two to eight basis points at a 12.25 a.m. reading. The 10-year was at 3.41%-3.43% and the 30-year was at 4.64%-4.66%.
The ICE AAA yield curve was cut five to nine basis points, while the Bloomberg BVAL was cut three to five basis points at a 12:30 p.m. reading.
"The muni market selloff is primarily a result of Treasury movement, but the orderliness of it in terms of not getting any more volatility in munis than Treasuries is a direct result of people's ability to withstand those moves," said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory.
The long end still looks pretty rich relative to Treasuries. But the belly and places "where the [separately managed accounts] somewhat transact" look somewhat decent historically, said Matt Smith, founder and CEO of Spline Data.
"I wouldn't be surprised to see some buyers step in as these cheap bid wanteds get bought and reoffered," he said.
There's still instantaneous cash needs, and if that can't be filled with new issue, there's very much a buyer here, Smith said.
"There's nothing fundamentally going on with the muni market. It just seems to be a mismatch of available liquidity and demand for liquidity in anticipation of some of supply," he said.
Munis saw larger losses than USTs, with UST yields rising only two to three basis points. However, this was still enough to push the 10-year UST yield to the highest levels since January 2025.
Yields outside the U.S. also rose. The 10-year Japanese government bond yield briefly topped 3% for the first time in 30 years, while both long-dated German and French bond yields reached their highest levels in 15 years.
"We believe several factors are contributing to the rise in global bond yields, including elevated corporate issuance, large and persistent U.S. budget deficits, uncertainty around inflation, expectations for additional interest rate hikes by global central banks and greater compensation demanded by investors for holding longer-maturity bonds amid an uncertain backdrop," said Brock Weimer, analyst on the Investment Strategy team at Edward Jones.
Renewed fighting in the Middle East has pushed oil prices above $90 in the U.S. and weighed on investor sentiment, UBS strategists said.
President Donald Trump threatened additional strikes against Iran after the Islamic Republic launched missiles at two U.S. air bases in Jordan, UBS noted.
Over the weekend, "Washington said it had struck Iranian launchers that were deploying mines into the Strait of Hormuz," UBS strategists said.
With no solution in place to reopen the Strait after six months of war, inflation worries persist, they said.
"Uncertainty over the Federal Reserve's policy outlook, fiscal concerns, and rising AI-related debt issuance have all kept bonds under pressure," UBS strategists said.
For the former, Federal Reserve Board Chair Kevin Warsh is giving less direction to the market, "letting the market make the assumptions on their own rather than giving them all the information and letting them … front-run the market in certain ways. So without the Fed directly implementing a tightening policy, which is generally there to slow down inflation and slow down growth, we're getting that without them doing anything," Sage's Timlin said.
