Tax

The top 25 state and local pension funds alone have seen the value of their public equities investments drop by a total of nearly a quarter of a trillion dollars in 2025, with roughly $169 billion of those losses coming during the four trading days that followed the Trump administration's April 2 announcement on global tariffs, a think tank said Wednesday.

Stocks surged moments after Trump's announcement of the 90-day pause for most countries on high tariffs he announced last week that have roiled markets.

Municipal AAA yield curves were cut up to another 42 basis points, depending on the curve, as of noon, pushing yields to multi-year highs and long-end muni to UST ratios above 100%. Muni yields have risen up to nearly 100 basis points in spots since the bond market rout began.

A $125 million bond sale by the Indianapolis Local Public Improvement Bond Bank for Indianapolis public transit operator IndyGo is on day-to-day status.

Weakness in the muni market has been partly amplified by ETF selling; high-grade yields rose more than 60 basis points on parts of the curve over two sessions.

"The changing momentum on what the market is looking for on tariffs and the volatility in the equity market is spilling over into the Treasury market, and munis can only fight the Treasury market for so long," said Pat Luby, head of municipal strategy at CreditSights.

"In the aftermath of this week's Treasury yield move lower, MMD-UST ratios have reached short-term highs," Barclays strategists said.

Squire Patton Boggs attorney Michael Cullers believes the 10th Amendment may pose an obstacle.

"With the initial announcement proving to be more aggressive than expected, the market responded overwhelmingly negatively," said Principal Asset's Seema Shah.

As the market absorbs the effects of the tariff rollout industry analysts are predicting a heavy dose of uncertainty in several key sectors of the municipal bond market.

At noon Thursday, muni yields had been bumped up to 12 basis points, depending on the curve, while UST yields rallied, with yields falling 13 basis points on the short-end.

The law cuts the individual income tax rate to 3% by calendar year 2030, with triggers that may drive future annual decreases until it ultimately falls to zero.

Details surrounding the tariffs — which could be anything from reciprocal tariffs to finally implementing delayed tariffs on Canada and Mexico and on pharmaceuticals — have remained unclear, but uncertainty has plagued the market for weeks.

Moody's Ratings upgraded Nebraska's issuer rating to Aaa from Aa1 on Monday. It also upgraded the state's $24 million certificates of participation to Aa1 from Aa2.

Nebraska Rep. Don Bacon, a Republican, has penned a "Dear Colleague" letter asking lawmakers to publicly support tax-exempt municipal bonds.

Legislation addressed expanding water supply, paying for flood damage, financing for capital projects, as well as a fiscal 2026 spending plan.

What's happening to the muni market is the "confluence of modest selling (via fund outflows and retail perhaps pausing during tax season); a heavy new issue calendar; and very thin near-term reinvestment expectations," said Matt Fabian, a partner at Municipal Market Analytics.

Goldman Sachs was tapped to lead a sales tax revenue bond issue to finance an arena to replace Paycom Center, home of the NBA's Thunder.

The governor is calling for a freeze on planned cuts to individual and corporate tax rates.

Mesirow's George Barbar said the group's top legislative focus is preserving the municipal bond tax exemption.