Munis sold off Thursday amid inflation data, Middle East turmoil and further reaction to Wednesday's Federal Open Market Committee meeting. U.S. Treasuries were weaker and equities ended higher.
Muni yields were cut one to six basis points, depending on the scale. USTs cheapened by up to six basis points, with bigger losses on the long end of the curve.
In the wake of the FOMC meeting Wednesday, USTs sold off in certain maturities, and the 30-year Treasury yield hit 5.244%, its
MMA's Kevin McGuigan said USTs are likely hitting such highs because of "the ballooning federal deficit and the very heavy supply of Treasury paper out there."
Munis were steady on Wednesday, but the muni market's reaction on Thursday was fairly predictable, McGuigan said.
"We were biased to open with a weaker tone, obviously [Thursday], given the steepening of the Treasury curve [Wednesday] after the Fed meeting," McGuigan said.
He compared the market's reaction to the aftermath of the October 2025 FOMC meeting, in which the Fed cut rates by a quarter point, but Jerome Powell said that another cut was not guaranteed for that December.
"That caused Treasury yields to jump about 10 basis points across maturities. And municipals obviously failed to respond, because we always do when moves are that late in the trading day," McGuigan said. "The following day, municipals did cheapen, I think two to four basis points, despite a range-bound Treasury market."
Fund flows
Investors added $760.8 million to municipal bond mutual funds in the week ended Wednesday, following $180.5 million of inflows the prior week, according to LSEG Lipper data. This is the 15th consecutive week of inflows.
High-yield funds saw outflows of $299.9 million compared to outflows of $91.1 million the previous week.
New-issue market
In the primary market Thursday, Barclays priced for the University of South Carolina (Aa2//AA/) $224.98 million of higher education revenue bonds, with 5s of 5/2027 at 2.58%, 5s of 2031 at 3.03%, 5s of 2036 at 3.48%, 5s of 2041 at 4%, 5s of 2046 at 4.27%, 5s of 2051 at 4.64% and 5.25s of 2056 at 4.7%, callable 5/01/2036.
