Munis were steady to slightly firmer Thursday as U.S. Treasuries richened and equities ended up after the U.S. and Iran signed a preliminary agreement to end the war.
The two countries reached an interim deal Wednesday, which, along with ending the war, will reopen the Strait of Hormuz.
Muni yields richened up to three basis points, depending on the scale, with biggest gains at the long end of the curve. UST yields fell one to three basis points.
"We're seeing the markets respond to that, in terms of yields lower, equities higher, gold's off, oil's lower in terms of everything playing out, in terms of kind of re-entering a normalized market, in terms of risk on again," said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory, of the preliminary agreement.
This interim agreement could be a stimulus for muni issuance, as some issuers may have waited until things were "hashed out" before coming to market, he said.
The slight firmness in the bond market comes after Wednesday's Federal Open Market Committee meeting.
Tax-exempt munis posted "nominal gains" after the FOMC meeting, NewSquare Capital's Kim Olsan wrote, but the asset class still has to reckon with the aftermath of the committee's "hawkish bias."
"An orientation toward a rate hike moved short UST yields up as much as 13 basis points," Olsan wrote. "A 2-year UST trading at 4.20% does put pressure on similar-range munis."
Munis typically lag UST movement, so it was possible that munis could have sold off Thursday. However, this didn't happen as it's possible Warsh's post-meeting comments and the news of an interim deal "offset" each other, Timlin said.
Fund flows
Investors added $1.187 billion into municipal bond mutual funds in the week ended Wednesday, following $614.7 million of inflows the prior week, according to LSEG Lipper data.
High-yield funds saw inflows of $452.6 million compared to inflows of $11.8 million the previous week.
Tax-exempt municipal money market funds saw inflows of $21.9 million for the week ending June 15, bringing total assets to $145.599 billion, according to the Money Fund Report, a weekly publication of EPFR.
The average seven-day simple yield for all tax-free and municipal money-market funds was 2.30%.
Taxable money-fund assets saw $25.795 billion added, bringing the total to $7.761 trillion.
The average seven-day simple yield was 3.34%.
The SIFMA Swap Index was at 2.59% on Wednesday compared to the previous week's 2.89%.
New-issue market
Issuance for the week of June 22 is at estimated $6.73 billion next week.
There are $3.132 billion of negotiated deals on tap and $3.598 billion of competitives, according to LSEG.
Los Angeles leads the negotiated calendar with $1.442 billion of 2026 tax and revenue anticipation notes.
The competitive calendar is led by Georgia with $1.571 billion of general obligation bonds across five series.
