Muni yields follow UST yields higher
CEOPORTRAIT
Muni weakness continued Thursday, with the asset class seeing further losses as it played catch-up to the extended selloff in U.S. Treasuries.
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Refinitiv MMD’s scale was cut three to 10 basis points at its 12:30 p.m. read, with the two-year at 2.74%-2.76%, the 10-year at 3.27%-3.29% and the 30-year at 4.76%-4.78%.
The ICE AAA yield curve was cut two to nine basis points at the 12:30 p.m. read, while Bloomberg BVAL saw yields rise three to six basis points.
Thursday’s losses reflect munis following USTs lower, driven by Tuesday’s selloff after a hotter-than-expected inflation report and a shifting message from Federal Reserve officials.
On Tuesday, munis were cut one to seven basis points, depending on the scale, while UST yields rose seven to 17 basis points, with the largest losses on the front end. For USTs, this was the largest daily increase in yields since the tariff tantrum on April 9, per J.P. Morgan strategists.
USTs were also weaker Thursday, with yields rising after President Donald Trump said the U.S. no longer needs a deal with Iran and directed Vice President JD Vance to focus on alleged corruption in Democratic-run states and municipalities.
For the rest of the year, munis will continue to be led around by USTs. “So whatever happens in Treasuries, so too will munis follow,” said Andrew Clinton, CEO and founder of Clinton Investment Management.
Overall, munis are an extremely safe asset class, and as such, Clinton sees value across the credit curve.
“There’s opportunity for investors to move down in credit quality and pick up a lot of yield, notwithstanding the absolute level of even AAA-rated bonds at the moment,” he said.
