Market Insights

Inflation expectations are climbing again, and that helps explain why yields are not coming down and continue to move higher.

The fourth quarter opened where September left off. The 10-year Treasury briefly touched 5.34% this morning, its highest level since 2002, before settling near 5.32%, and the 30-year reached 5.67%, a 24-year high.

Municipal bonds traded down in price this week, pushing yields on benchmark securities to their highest levels since at least 2011.

The Federal Reserve raised its target rate a quarter point to a range of 3.75% to 4% this week, its first hike since 2023.

Heading into the September 16 FOMC decision, swaps and futures markets imply roughly 60% odds that the Fed lifts its target range to 3.75%–4%.

The municipal market has been caught up in a broader global bond selloff over the past few weeks, driven by rising oil prices and inflation concerns. Treasury yields moved higher alongside munis, and the move was not confined to the U.S.

Munis’ federal tax exemption is doing double duty this month, keeping borrowing costs manageable for issuers while handing investors some of the highest tax-adjusted yields in years.

On Wednesday, the Treasury Department said it would at least double the size of its liquidity support buyback operations for securities in the 10-year to 30-year sector, Secretary Scott Bessent’s latest attempt to rein in long-term borrowing costs from multi-year highs.

This week’s data leans one direction: cooling. Core CPI matched the slowest annual pace since March 2021 at 2.5%, and nonfarm payrolls fell by 23,000, with a net 103,000 jobs cut from May and June estimates.

NYC dodges a downgrade. Here’s what that means for your muni portfolio.

The Federal Reserve held rates steady this week, but the vote itself was the story. Three regional Fed presidents — Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari, and Dallas’s Lorie Logan — dissented in favor of a quarter-point hike.

Yields moved higher again this week. The 10-year Treasury touched 4.70% as we write this, and munis and corporates followed, pushing prices lower across the curve.

Investors placed more than $70 billion in orders for roughly $2.4 billion of tax-exempt bonds this week, one of the largest order books in municipal market history.

Fed Chairman Kevin Warsh’s break from forward guidance is looking less like a one-off posture and more like doctrine.

Municipal investors are entering the summer with their most favorable technical backdrop in months.