The war in Iran continues to make headlines with Iran reportedly insisting that ships obtain permission and the US declaring the Strait is open to all vessels. This uncertainty has resulted in oil continuing to price at higher levels, West Texas Intermediate is back in the mid 70’s this morning. Inflation concerns with higher energy prices continue to move the long-end of the Treasury yield curve, with maturities past 20-years now eclipsing 5%. On the short-end, we are experiencing upward pressure around the policy sensitive 2-year tenor amid speculation the Fed will raise rates sooner rather than later. Fed funds futures are now almost fully pricing in a rate hike of 25bp in September (92%), which, as of last week, was previously thought to not occur until December. This week we will be closely following the US data on CPI and producer prices as they will be the final inflation prints before the Fed’s meeting later this month.
Implied Overnight Rate & Number of Hikes/Cuts
Insights and Strategy
Treasury curves steepened a bit over the past week, while the municipal yield curve followed in sympathy. However, the slope of the 10 to 30-year municipal curve remains near the tightest levels seen in over a year. This flattening is the result of shifting expectation for longer maturities as markets adjust inflation expectations against the strength of the economy. When comparing the municipal yield curve to the Treasury curve, the first 6 months immediately stand-out with the inverted shape of the municipal curve contrasting with the steeply sloped Treasury curve. The slope at the long-end of the municipal yield curve, past 20-years, remains relatively flat with a total slope of 34 bps from 21-30-years. Due to this flat tail, municipal bond investors can currently buy 20-year maturities that yield almost 90% of the 30-year curve versus 71% for 10-year maturities.
Over the past week, Municipal/Treasury ratios have generally decreased (richened), with one-year ratios notably well below 60%. Furthermore, ratios have recently fallen well below several important reference points along the curve. Ratios for 10-year municipal yields are now well under 70% of Treasuries, 20-year ratios are below 80% and 30-year ratios are below 90% of Treasuries. For investors seeking to maximize curve positioning with relative value, the 19 to 21-year part of the municipal yield curve is attractive with slopes of 10 to 13-bps per year and yields around 80% of Treasuries. Although ratios past 20-years are more attractive, relative to Treasuries, the yield curve is very flat over these longer tenors.
The Municipal the new issue calendar remains elevated this week with US state and local governments expected to sell around $12.5 billion of bonds. Notable deals include: the New York State Thruway Authority, which plans to sell $2.44 billion; Aquarion Water Authority Water System, with $2.37 billion; New Jersey Turnpike Authority, with $1.06 billion; and, Norton Healthcare Obligated Group is expected to bring $504 million to the market. In addition, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $1.4 billion to municipal-bond funds, according to LSEG Lipper Global Fund Flows.
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.
July 13, 2026 | Timothy Iltz
Overview
The war in Iran continues to make headlines with Iran reportedly insisting that ships obtain permission and the US declaring the Strait is open to all vessels. This uncertainty has resulted in oil continuing to price at higher levels, West Texas Intermediate is back in the mid 70’s this morning. Inflation concerns with higher energy prices continue to move the long-end of the Treasury yield curve, with maturities past 20-years now eclipsing 5%. On the short-end, we are experiencing upward pressure around the policy sensitive 2-year tenor amid speculation the Fed will raise rates sooner rather than later. Fed funds futures are now almost fully pricing in a rate hike of 25bp in September (92%), which, as of last week, was previously thought to not occur until December. This week we will be closely following the US data on CPI and producer prices as they will be the final inflation prints before the Fed’s meeting later this month.
Implied Overnight Rate & Number of Hikes/Cuts
Insights and Strategy
Treasury curves steepened a bit over the past week, while the municipal yield curve followed in sympathy. However, the slope of the 10 to 30-year municipal curve remains near the tightest levels seen in over a year. This flattening is the result of shifting expectation for longer maturities as markets adjust inflation expectations against the strength of the economy. When comparing the municipal yield curve to the Treasury curve, the first 6 months immediately stand-out with the inverted shape of the municipal curve contrasting with the steeply sloped Treasury curve. The slope at the long-end of the municipal yield curve, past 20-years, remains relatively flat with a total slope of 34 bps from 21-30-years. Due to this flat tail, municipal bond investors can currently buy 20-year maturities that yield almost 90% of the 30-year curve versus 71% for 10-year maturities.
Over the past week, Municipal/Treasury ratios have generally decreased (richened), with one-year ratios notably well below 60%. Furthermore, ratios have recently fallen well below several important reference points along the curve. Ratios for 10-year municipal yields are now well under 70% of Treasuries, 20-year ratios are below 80% and 30-year ratios are below 90% of Treasuries. For investors seeking to maximize curve positioning with relative value, the 19 to 21-year part of the municipal yield curve is attractive with slopes of 10 to 13-bps per year and yields around 80% of Treasuries. Although ratios past 20-years are more attractive, relative to Treasuries, the yield curve is very flat over these longer tenors.
The Municipal the new issue calendar remains elevated this week with US state and local governments expected to sell around $12.5 billion of bonds. Notable deals include: the New York State Thruway Authority, which plans to sell $2.44 billion; Aquarion Water Authority Water System, with $2.37 billion; New Jersey Turnpike Authority, with $1.06 billion; and, Norton Healthcare Obligated Group is expected to bring $504 million to the market. In addition, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $1.4 billion to municipal-bond funds, according to LSEG Lipper Global Fund Flows.
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.