The
Following Trump's announcement that the largest tariffs against most countries had been delayed for 90 days, the muni market had a subdued reaction as the damage done earlier in the session held. U.S. Treasuries whipsawed and closed with large losses on the short end of the curve, highlighting the short-term policy uncertainty, while stocks rallied on the news.
Very few deals priced in the primary as most issuers and deal teams pulled the transactions amid the volatility.
With the midday market read of 28-42 basis point cuts, MMD's final scale saw yields cut 30 to 42 basis points.
Bloomberg BVAL AAA yields rose 30 basis points at noon, and yields were cut 29 to 32 basis points to end the day. ICE Data Services saw yields rise 26-38 basis points at noon, but the AAA scale pared back some losses as yields were only cut 20 to 21 basis points after 3:30 p.m.
Rising yields sent muni-UST ratios soaring higher. The two-year ratio Wednesday was at 87%, the five-year at 88%, the 10-year at 89% and the 30-year at 101%, according to Municipal Market Data's 3 p.m. EDT read. ICE Data Services had the two-year at 87%, the five-year at 86%, the 10-year at 86% and the 30-year at 100% at 4 p.m.
"The equity market is looking at this more positively, but bonds are still thinking, 'Well, these tariffs still have to be resolved,'" said Kim Olsan, a senior fixed income portfolio manager at NewSquare Capital. "There's still a 10% across-the-board tariff in place even if you do get a 90-day stay."
While bid wanteds soared Tuesday to $3.07 billion in par value, the
And while tariffs and the start of the COVID-19 pandemic are very different situations, there are similarities as yields are surging, contributing to market dislocation, said Sudip Mukherjee, a senior fixed income strategist at UBS.
However, the market moves are a rate-driven shock, not a credit shock, as credit spreads are "fairly well contained," he said
USTs had sold off overnight with yields rising as high as 4.51% before paring back losses this morning — as "the rapid unwinding of the basis trade, where hedge funds borrow to take advantage of the tiny difference between cash Treasuries and future; a broader dash for cash, investors selling Treasuries to cover short positions or switch into money market funds to escape longer-run interest rate risk; [and/or] foreigners might be responding to new trade policies by abruptly shifting away from American assets, something we explore a bit further below," played a role, according to Will Compernolle, a macro strategist at FHN Financial.
And while UST yields fell right after Trump's announcement, they whipsawed from there and ended the session with short-term USTs seeing the greatest losses and a recovery out long.
"Post [tariff] reactions have been positive, if we could even use that word, for munis right now," Olsan noted.
Some customer cross trades versus an order activity is happening at somewhat usual spreads, if the cuts are factored in, according to Olsan.
The tariff postponement was not enough to pare back the large cuts for munis but will help stop "the bleeding," she said.
"The delay in tariffs is a constructive and a positive thing and proves what Trump is trying to accomplish one of his main goals: to get people to the negotiating table," Brigati said. "And it did it; his forceful and rather direct tariff threats ultimately got a lot of people to the negotiating table."
While the latest announcement shows that tariffs are being delayed by 90 days for most countries, credit implications "are likely to evolve with those tariff-impacted credits and regional economies most at risk," said Jeff Lipton, a research analyst and market strategist.
There could still be "an enduring impact upon national GDP and inflation, especially since there is a push from the administration to reform a number of federal programs," he noted, while "employment losses can be expected to accelerate given that capital investment across both corporate and governmental stakeholders is likely to be cut back, and this should be visible in forthcoming labor reports.
"Calls for the onset of recession have elevated with an actual event projected to emerge in the second half of 2025," he said. "Of course, the tariff delay could alter such prognostications, but policy uncertainty is likely to keep instability front and center."
However, the tariffs will eventually happen, with Mukherjee believing the weighted average of tariffs will be "in the teens," which is still a "big rise" from April 2.
"So in effect, economic growth would slow and credit spreads would widen," he said. "In that scenario, we're not calling for recession, but sharply lower growth would send BBB and high-yield spreads wider."
In the competitive market, the Berkeley Unified School District, California, (Aa2/AA+//) sold $147.5 million of Election of 2020 GOs, Series F, to BofA Securities, with 5s of 8/2026 at 3.44%, 5s of 2028 at 3.50%, 5s of 2035 at 4.05%, 5s of 2040 at 4.34%, 5s of 2045 at 4.81%, 5s of 2050 at 4.92% and 5s of 2054 at 4.98%, callable 8/1/2035.
There were five bidders on the deal, which typically would have seen at least 10.
The Investment Company Institute reported fund flows for the week ending April 2, so these figures do not account for the recent market volatility.
ICI reported outflows of $1.15 billion following $175 million of outflows the previous week.
Exchange-traded funds saw inflows of $944 million after $312 million of inflows the week prior, per ICI data.
AAA scales
MMD's scale was cut 30 to 42 basis points: The one-year was at 3.40% (+42) and 3.42% (+42) in two years. The five-year was at 3.59% (+42), the 10-year at 3.89% (+35) and the 30-year at 4.84% (+30) at 3 p.m.
The ICE AAA yield curve was cut 20 to 21 basis points: 3.20% (+20) in 2026 and 3.25% (+20) in 2027. The five-year was at 3.38% (+20), the 10-year was at 3.70% (+20) and the 30-year was at 4.74% (+20) at 4 p.m.
The S&P Global Market Intelligence municipal curve was cut 31 to 40 basis points: The one-year was at 3.39% (+40) in 2025 and 3.40% (+40) in 2026. The five-year was at 3.56% (+40), the 10-year was at 3.88% (+36) and the 30-year yield was at 4.82% (+31) at 4 p.m.
Bloomberg BVAL was cut 29 to 32 basis points: 3.22% (+32) in 2025 and 3.30% (+32) in 2026. The five-year at 3.49% (+31), the 10-year at 3.80% (+30) and the 30-year at 4.80% (+29) at 4 p.m.
Treasuries were weaker 10 years and in.
The two-year UST was yielding 3.886% (+16), the three-year was at 3.91% (+15), the five-year at 4.038% (+12), the 10-year at 4.395% (+4), the 20-year at 4.794% (-2) and the 30-year at 4.731% (-3) near the close.
