This morning oil prices slid to a three-month low on news the US and Iran reached an agreement to reopen the Strait of Hormuz. Details of the agreement are still preliminary; but, the Strait of Hormuz is anticipated to reopen following Friday’s signing. The agreement marks the beginning of 60 days of talks regarding Iran’s nuclear program with the potential for continued military attacks if an understanding isn’t reached. However, with oil prices currently around $80-85 per barrel, central bankers are now under less pressure to adjust rates than last week. As a result, Fed rate-hike expectations have shifted further into the future, with Fed Funds Futures not fully pricing in a 25bp move until March 2027. Although the markets are not expecting the Fed to adjust rates at its meeting this week, markets will be closely following Kevin Warsh’s first Fed meeting as “Chairman.”
West Texas Intermediate Crude
Treasuries rallied over this past week on anticipation of a deal in Iran and the opening of the Strait of Hormuz. However, munis were little changed with yields only slightly higher from six to 14-years. Investors continue be rewarded for extending out the yield curve with the steepest yields in the 18-21-year maturity range. The slope at the long-end of the municipal yield curve, past 20-years, remains relatively flat with a total slope of 32 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 less than 70% for 10-year maturities.
Insights and Strategy
Due to the relative underperformance of munis over the past week, Municipal/Treasury ratios have generally increased over the past week. Looking back a bit, ratios shorter than 10-years, particularly those under one-year, have become dramatically richer over the past month with one-year and shorter ratios now 7.8% lower. Municipal bonds have now 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 12 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.
Despite the abbreviated holiday week, the Municipal the new issue calendar remains relatively robust this week with US state and local governments expected to sell over $11 billion of bonds. Notable deals include: the State of Washington with $1.52 billion; County of Miami-Dade FL Aviation Revenue has scheduled $637.9 million, New York State Housing Finance Agency is estimated to offer $509.6 million, and the State of Louisiana is expected to bring $375 million to the market. However, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $625 million to municipal-bond funds, according to LSEG Lipper Global Fund Flows. Furthermore, June tax-exempt reinvestment proceeds are expected to reach approximately$54.5 billion.
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.
June 15, 2026 | Timothy Iltz
Overview
This morning oil prices slid to a three-month low on news the US and Iran reached an agreement to reopen the Strait of Hormuz. Details of the agreement are still preliminary; but, the Strait of Hormuz is anticipated to reopen following Friday’s signing. The agreement marks the beginning of 60 days of talks regarding Iran’s nuclear program with the potential for continued military attacks if an understanding isn’t reached. However, with oil prices currently around $80-85 per barrel, central bankers are now under less pressure to adjust rates than last week. As a result, Fed rate-hike expectations have shifted further into the future, with Fed Funds Futures not fully pricing in a 25bp move until March 2027. Although the markets are not expecting the Fed to adjust rates at its meeting this week, markets will be closely following Kevin Warsh’s first Fed meeting as “Chairman.”
West Texas Intermediate Crude
Treasuries rallied over this past week on anticipation of a deal in Iran and the opening of the Strait of Hormuz. However, munis were little changed with yields only slightly higher from six to 14-years. Investors continue be rewarded for extending out the yield curve with the steepest yields in the 18-21-year maturity range. The slope at the long-end of the municipal yield curve, past 20-years, remains relatively flat with a total slope of 32 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 less than 70% for 10-year maturities.
Insights and Strategy
Due to the relative underperformance of munis over the past week, Municipal/Treasury ratios have generally increased over the past week. Looking back a bit, ratios shorter than 10-years, particularly those under one-year, have become dramatically richer over the past month with one-year and shorter ratios now 7.8% lower. Municipal bonds have now 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 12 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.
Despite the abbreviated holiday week, the Municipal the new issue calendar remains relatively robust this week with US state and local governments expected to sell over $11 billion of bonds. Notable deals include: the State of Washington with $1.52 billion; County of Miami-Dade FL Aviation Revenue has scheduled $637.9 million, New York State Housing Finance Agency is estimated to offer $509.6 million, and the State of Louisiana is expected to bring $375 million to the market. However, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $625 million to municipal-bond funds, according to LSEG Lipper Global Fund Flows. Furthermore, June tax-exempt reinvestment proceeds are expected to reach approximately$54.5 billion.
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.