

The Municipal bond market underperformed Treasuries this week which saw yields drop dramatically across the curve. The June CPI report was released on Wednesday and showed that both headline and core inflation cooled sharply to their lowest levels since 2021. Headline and core inflation rose at annual rates of 3% and 4.8% respectively. Core inflation excludes volatile food and energy prices and is a more favored gauge of inflation by the Federal Reserve. Both inflation readings came in much lower than economists expected, suggesting that the Federal Reserve is making real progress in its quest to tame inflation.
Despite the great news on inflation, Municipal yields experienced only a modest rally, increasing Muni-to-UST ratios as a result. Ratios ended the week at 63% in year 2 (+4%) and 69% in year 10 (+4%).

Tax-exempt yields over the past week
10-Year MMD | 30-Year MMD | |
---|---|---|
July 6, 2023 | 2.61% | 3.54% |
July 13, 2023 | 2.59% | 3.51% |
Change (bps) | -2 | -3 |
Treasury yields experienced a much more substantial rally as a result of the positive news on inflation with yields declining by as much as 40 basis points on the short end. Investors believe the Federal Reserve is still likely to raise rates by 25 basis points at the next FOMC meeting, but they have begun to reassess their rate hike expectations for the rest of the year.
Treasury yields over the past week
10-Year Treasury | 30-Year Treasury | |
---|---|---|
July 6, 2023 | 4.05% | 4.01% |
July 13, 2023 | 3.76% | 3.90% |
Change (bps) | -29 | -11 |
Written by Michael Garcia, Associate, Oppenheimer & Co. Inc., Public Finance.
Disclaimer
All materials, including proposed terms and conditions, are indicative and for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation and will be evidenced by a formal agreement. Opinions expressed are our present opinions only and are subject to change without further notice. The information contained herein is confidential. By accepting this information, the recipient agrees that it will, and it will cause its directors, partners, officers, employees and representatives to use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is prohibited. Except in so far as required to do so to comply with applicable law or regulation, express or implied, no warranty whatsoever, including but not limited to, warranties as to quality, accuracy, performance, timeliness, continued availability or completeness of any information contained herein is made. Opinions expressed herein are current opinions only as of the date indicated. Any historical price(s) or value(s) are also only as of the date indicated. We are under no obligation to update opinions or other information.
The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. Oppenheimer does not provide accounting, tax or legal advice; however, you should be aware that any proposed indicative transaction could have accounting, tax, legal or other implications that should be discussed with your advisors and or counsel. The materials should not be relied upon for the maintenance of your books and records or for any tax, accounting, legal or other purposes. In addition, we mutually agree that, subject to applicable law, you may disclose any and all aspects of any potential transaction or structure described herein that are necessary to support any U.S. federal income tax benefits, without Oppenheimer imposing any limitation of any kind.
Oppenheimer shall have no liability, contingent or otherwise, to the user or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the data or formulae provided herein or for any other aspect of the performance of this material. In no event will Oppenheimer be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using the data provided herein or this material, even if Oppenheimer has been advised of the possibility of such damages. Oppenheimer will have no responsibility to inform the user of any difficulties experienced by Oppenheimer or third parties with respect to the use of the material or to take any action in connection therewith. The fact that Oppenheimer has made the materials or any other materials available to you constitutes neither a recommendation that you enter into or maintain a particular transaction or position nor a representation that any transaction is suitable or appropriate for you.
© 2023 Oppenheimer & Co. Inc. Transacts Business on All Principal Exchanges and Member SIPC. All rights reserved. No part of this presentation may be reproduced in any manner without the written permission of Oppenheimer. Oppenheimer & Co. Inc., including any of its affiliates, officers or employees, does not provide legal or tax advice. Investors should consult with their tax advisor regarding the suitability of Municipal Securities in their portfolio.