Municipal Weakness Accelerated Last Week
US municipals posted negative returns and underperformed Treasuries as Municipal/Treasury ratios reverted closer to longer-term averages. High-grade municipal yields moved 23-30 bps higher across the curve. Technicals softened as municipal outflows extended into a second week. The Bloomberg Municipal Index returned -1.33%, while the HY Muni Index returned -1.48%. This week we highlight implications of the end of a record inflow cycle observed from the spring of 2020.