Curve Commentary: April 14, 2025

Last week marked the ninth straight week we have seen the additional yield investors demand to own 30-year Treasuries versus two-year maturities increase.  This gap reached levels last seen in 2022 and is only one of two periods of this magnitude that Bloomberg has recorded since it began collecting this data in 1992.   The U.S. economy is facing considerable turbulence (including geopolitics), with the potential positives of tax reform and deregulation and the potential negatives of tariffs and trade wars, ongoing sticky inflation, high fiscal deficits and high daily volatility.

The municipal bond market has experienced uncharacteristically high volatility over the past week amid escalating tariff threats and retaliatory measures from U.S. trade partners.  Daily changes in the municipal market swung wildly in both directions with almost 50 basis points of bumps on Thursday following 42 basis points of cuts on Wednesday.  This is extreme for a market accustomed to days where yields finish the day unchanged.  Today we are continuing to see cautious attitudes with accounts hanging-out in the safety of cash versus wading back into the market.

The extreme volatility from last week has resulted in a steeper Treasury curve and a parallel shift up in the municipal curve of 23 to 31 basis points. The short-end of the muni curve experienced the biggest movement in stark contrast to the Treasury curve which experienced the most movement on the long-end.  Not surprisingly, the relationships along the curve have changed, with the steepest point being the 15-17 year tenor with an overall change of 30 basis points.  Slopes have generally become more consistent along the municipal curve with some flattening on the long-end out past 20-years.

Trade Volumes

Secondary market activity surged last week, with the number of trades and total par traded nearly doubling daily averages on Wednesday.  Municipal bond mutual funds experienced their largest outflows since the volatile market conditions of June 2022. According to LSEG Lipper Global Fund Flows, long-term municipal bond funds lost $2.6 billion while high-yield funds lost $759 million.  Although the new issue municipal calendar is rather full at $12.1 billion this week, many of these deals are scheduled day/day.

Ratios

Over the past week muni/Treasury ratios have changed dramatically as a result of diverging yield curve moves.  Ratios are at the highest level we have seen in the past 12-months and present significant value when compared to Treasury bonds.  The short-end of the municipal yield curve experienced the largest changes with 1-year ratios increasing 16% to 79.26% followed by the 5-year tenor with ratios improving 11% to 81%.  Overall, the 17-year portion of the curve is an attractive place to position, with relatively steep slopes and yields approaching 90% of 20-year Treasury bonds.

Herbert J. Sims & Co. Inc. is a SEC registered broker-dealer, a member of FINRA, SIPC. The information contained herein has been prepared based upon publicly available sources believed to be reliable; however, HJ Sims does not warrant its completeness or accuracy and no independent verification has been made as to its accuracy or completeness. The information contained has been prepared and is distributed solely for informational purposes and is not a solicitation or an offer to buy or sell any security or instrument or to participate in any trading or investment strategy, and is subject to change without notice. All investments include risks. Nothing in this message or report constitutes or should be construed to be accounting, tax, investment or legal advice.

Curve Commentary: April 7, 2025

Volatility remains uncharacteristically high following last week’s tariff announcement and escalating pressure from the markets and politicians to cut rates.  However, last Friday, the Fed clearly stated their concerns regarding the potential for higher inflation and slower growth and has concluded it is too soon to determine the appropriate path for monetary policy.  As a result, market attentions are divided between concerns of stagflation and the prospects of the fed cutting rates leading to increased volatility as the market flips back and forth.  This past week has been challenging to manage from a trading perspective as the MMD municipal market index has seen strong moves in both directions with bumps of 18 to 24 bps along the yield curve last Thursday and Friday and cuts of 18 to 20 bps indicated for today.

In response to the tariff news, the municipal bond yield curve has responded with a 17 bps shift lower in a parallel fashion.  In contrast, the Treasury curve continues to flatten with the policy sensitive 2-3 year portion of the curve seeing the largest movement of around 18 bps.  Following the shift, municipal yields remain steep in the 8 to 11-year portion of the curve, with a slope of 33bps, and the 15 to 18-year portion of the curve, with a slope of 43 bps.  The 15-18 year portion of the municipal curve continues to offer a combination of relatively steep slope and meaningful yield, allowing investors to lock-in over 92% of the yield on the 30-year muni maturity and yields around 85% of equivalent Treasury bonds.

As a result of the small declines on the long-end of the Treasury curve and the relatively strong moves in the municipal curve, muni/Treasury ratios have changed significantly.  Ratios now lean more to the rich side than they did last week.  Over the past month, the 10-year ratio saw the largest change and has fallen almost 7% to back below 75%.  Over the past week, the 5-year ratio saw the largest change and has declined 3.6% to 70%.

Herbert J. Sims & Co. Inc. is a SEC registered broker-dealer, a member of FINRA, SIPC. The information contained herein has been prepared based upon publicly available sources believed to be reliable; however, HJ Sims does not warrant its completeness or accuracy and no independent verification has been made as to its accuracy or completeness. The information contained has been prepared and is distributed solely for informational purposes and is not a solicitation or an offer to buy or sell any security or instrument or to participate in any trading or investment strategy, and is subject to change without notice. All investments include risks. Nothing in this message or report constitutes or should be construed to be accounting, tax, investment or legal advice.

The 22nd Annual HJ Sims Late Winter Conference

Our 22nd Annual HJ Sims Late Winter Conference examined trends and developments critical to the success of senior living communities and charter school facilities. An extensive and thoughtful agenda was compiled to address financing methods and operating strategies that can help alleviate existing challenges and encourage continued growth in the non-profit and proprietary sectors of our industry. Throughout the conference, we delivered a dynamic group of speakers and experts committed to sharing thought-provoking views and providing profound insight.

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Conference FEEDBACK SURVEY

Help us make the next Late Winter Conference even more successful by completing our feedback survey. We very much appreciate your input.

Please note that you must complete the survey to receive your educational credits certificate. If you did not receive our survey, please contact Catherine Vancho at [email protected]

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View the many beautiful photos from our conference in the galleries below. Click on each album to see all of the photos from the event.

Save the Date

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The 23rd Annual HJ Sims Annual Conference will be held February 24th-26th, 2026 at the Marriott Sanibel Harbour Resort & Spa in Fort Myers, FL. Stay tuned for more information soon. We can’t wait to see you there!

For more information, please contact Kat Dymond.

The 22nd Annual HJ Sims Late Winter Conference

Our 2025 conference will feature two education tracks – one for charter schools and one for senior living. These dual education tracks will be for those interested in one or the other, as well as joint sessions.

Our 22nd Annual HJ Sims Late Winter Conference will examine trends and developments critical to the success of senior living communities and charter schools. An extensive and thoughtful agenda has been compiled to address financing methods, operating strategies and technological advancements that can help alleviate existing challenges and encourage continued growth in the non-profit and proprietary sectors of these industries. Throughout the conference, we will deliver a dynamic group of speakers and experts committed to sharing thought-provoking views and providing profound insight. Our series of keynote speakers, breakout sessions, panels and roundtables will deliver an invaluable forum for exchanging ideas and information, while also providing unique networking opportunities. The objective of our Late Winter Conference is for industry participants to learn and discuss each other’s strategies and solutions for success.

REGISTER HERE!

For more information, please contact Kat Dymond