“Last week’s headlines were dominated by news of President Maduro’s removal from power in Venezuela. While the development carried immediate implications for the energy market, other financial markets...
“Last week’s headlines were dominated by news of President Maduro’s removal from power in Venezuela. While the development carried immediate implications for the energy market, other financial markets initially viewed the event as having limited direct impact.”
As the week progressed, market attention shifted toward the anticipated Supreme Court decision involving President Trump, a ruling that ultimately did not materialize. Expectations for an adverse decision weighed on sentiment, with concerns that it could pressure equities. In the absence of a ruling, however, stocks advanced to another record high on Friday. Investors now remain in a ‘wait-and-see’ mode, anticipating that a decision could come as early as this week.
Friday’s key BLS employment report was overshadowed by anticipation surrounding the aforementioned Supreme Court decision. In brief, Nonfarm Payrolls fell short of expectations, adding just 50k jobs versus an already modest forecast of 70k. Meanwhile, the Unemployment Rate, which had climbed to 4.6% for the combined October/November period, eased to 4.4%, suggesting the labor market may be less fragile than feared.
By Friday’s close, Fed Funds futures reflected a sharp drop in expectations for a January rate cut—from an already low 13% to just 5%. Easing concerns over labor market deterioration prompted traders to further scale back bets on near-term policy easing.
Treasuries traded within a familiar range for most of the week, with 10-year yields testing the 4.20% level. In contrast, the more Fed-sensitive 2-year note surged on Friday, breaking above the 3.50% threshold that has recently served as the key pivot for front-end rates.
From the Municipal Desk (with contributions from Ryan Riffe):
January's reinvestment capital, a light new issue calendar, and robust inflows into municipal funds and ETFs helped pave the way for a great start to 2026 in the municipal market. The MMD scale strengthened across the curve as benchmark yields fell each day. By Friday's close, it was evident that the strongest demand was for 15-20-year maturities, where yields dropped by as much as 17 basis points. This did not come as a surprise, as we continue to see accounts taking advantage of the steepest part of the municipal yield curve. New issue deals, such as Conroe, TX ISD, saw oversubscriptions for maturities as high as 24 times. With the new issue calendar pricing at just $6.9 billion, customer and street accounts were forced to fill inquiries in the secondary market.
The market’s strength this week pushed municipal ratios into richer territory as the 10-Year Muni/UST ratio hit 64%, a level the market has not seen since May of 2024. Although the tone remains positive overall, we do look ahead with some caution given richer valuations, rising supply, and potential market volatility stemming from the Supreme Court decision on Trump tariffs.
Weekly Supply @ $11.5 Billion
2-YR Ratio @ 64%
3-YR Ratio @ 62%
5-YR Ratio @ 60%
10-YR Ratio @ 64%
30-YR Ratio @ 87%
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
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