The Bureau of Labor Statistics released its Employment Situation report last Friday which reported nonfarm payroll increased by 115,000 jobs in April, despite rising energy costs from the Iran war. This is significant as the markets contemplate the future rate path of the Fed and its dual mandate to promote both maximum employment and stable prices. Collectively, the job gains in March and April mark the strongest two-month increase since 2024. Recent employment data gives the Fed justification to maintain interest rates at current levels, for the foreseeable future, while they focus on inflationary risks from rising energy prices.
Insights and Strategy
Over the past week, both munis and Treasuries advanced with a modest decrease of four and a half to seven and a half basis points in Treasury yields for all but the shortest maturities. Munis lagged with a more uniform response over the week with a parallel shift downward of about three basis points. The biggest changes in Treasuries occurred in the 15 to 20-year tenor where rates fell by about seven basis points. Despite these developments, investors continue be rewarded for extending out the yield curve with the steepest yields in the 18-21-year maturity range. The muni yield curve has generally flattened over the past 3-months with short yields rising faster than longer maturities as the narrative for rate cuts and inflation has shifted. As a result, the percentage of yields relative to the 30-year curve has increased for shorter maturities. The long-end of the yield curve remains increasingly flat past 20-years, with a total slope of 26 bps from 21-30-years. Due to this flat tail, municipal bond investors can currently buy 20-year maturities that yield over 90% of the 30-year curve versus less than 70% for 10-year maturities.
Municipal/Treasury ratios have generally declined over the past week as the short-end of the yield curve declined more than the long-end. Municipal bonds have fallen just below several important reference points along the curve. Ratios for 10-year municipal yields are 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 18 to 21-year part of the municipal yield curve is attractive with slopes of 12 to 13-bps per year and yields approaching 80% of Treasuries. Although ratios past 20-years are more attractively priced, relative to Treasuries, the yield curve is very flat over these longer tenors.
The Municipal new issue calendar picks-up again this week as US state and local governments are expected to sell over $13 billion of bonds. Notable deals include: the State of Connecticut, which plans to sell $1.12 billion of bonds; the City of Atlanta Water & Wastewater Revenue has scheduled $1.1 billion; the City of Boston is expected to offer $609.3 million; and, Trustees of Columbia University in the City of New York is scheduled to bring $486.9 million to the market. Despite record issuance this year, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $1.8 billion to municipal-bond funds, according to LSEG Lipper Global Fund Flows. Furthermore, May tax-exempt reinvestment proceeds are expected to reach approximately $34.5 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.
May 11, 2026 | Timothy Iltz
Overview
The Bureau of Labor Statistics released its Employment Situation report last Friday which reported nonfarm payroll increased by 115,000 jobs in April, despite rising energy costs from the Iran war. This is significant as the markets contemplate the future rate path of the Fed and its dual mandate to promote both maximum employment and stable prices. Collectively, the job gains in March and April mark the strongest two-month increase since 2024. Recent employment data gives the Fed justification to maintain interest rates at current levels, for the foreseeable future, while they focus on inflationary risks from rising energy prices.
Insights and Strategy
Over the past week, both munis and Treasuries advanced with a modest decrease of four and a half to seven and a half basis points in Treasury yields for all but the shortest maturities. Munis lagged with a more uniform response over the week with a parallel shift downward of about three basis points. The biggest changes in Treasuries occurred in the 15 to 20-year tenor where rates fell by about seven basis points. Despite these developments, investors continue be rewarded for extending out the yield curve with the steepest yields in the 18-21-year maturity range. The muni yield curve has generally flattened over the past 3-months with short yields rising faster than longer maturities as the narrative for rate cuts and inflation has shifted. As a result, the percentage of yields relative to the 30-year curve has increased for shorter maturities. The long-end of the yield curve remains increasingly flat past 20-years, with a total slope of 26 bps from 21-30-years. Due to this flat tail, municipal bond investors can currently buy 20-year maturities that yield over 90% of the 30-year curve versus less than 70% for 10-year maturities.
Municipal/Treasury ratios have generally declined over the past week as the short-end of the yield curve declined more than the long-end. Municipal bonds have fallen just below several important reference points along the curve. Ratios for 10-year municipal yields are 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 18 to 21-year part of the municipal yield curve is attractive with slopes of 12 to 13-bps per year and yields approaching 80% of Treasuries. Although ratios past 20-years are more attractively priced, relative to Treasuries, the yield curve is very flat over these longer tenors.
The Municipal new issue calendar picks-up again this week as US state and local governments are expected to sell over $13 billion of bonds. Notable deals include: the State of Connecticut, which plans to sell $1.12 billion of bonds; the City of Atlanta Water & Wastewater Revenue has scheduled $1.1 billion; the City of Boston is expected to offer $609.3 million; and, Trustees of Columbia University in the City of New York is scheduled to bring $486.9 million to the market. Despite record issuance this year, technical conditions remain supportive of the primary market. Last week, municipal bond investors added approximately $1.8 billion to municipal-bond funds, according to LSEG Lipper Global Fund Flows. Furthermore, May tax-exempt reinvestment proceeds are expected to reach approximately $34.5 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.