Last week’s market narrative was shaped by geopolitics, central bank policy, and earnings - often competing for investors’ attention. Amid the ongoing conflict with Iran, the closure of the Strait of Hormuz, and the resulting surge in oil prices, market participants briefly shifted their focus mid‑week to the Federal Reserve’s policy announcement. Even with the temporary distraction of a highly anticipated FOMC meeting, volatility remained elevated as markets digested a steady flow of headlines, including first‑quarter earnings from the largest U.S. technology companies. Meanwhile, the ongoing back‑and‑forth between the Trump administration and Iranian officials continued to inject uncertainty into global markets.
As widely expected, the Federal Reserve left interest rates unchanged. The most notable development from Chair Powell was his indication that he intends to remain on the Board of Governors for an indeterminate period after stepping down as Chair, when Kevin Warsh assumes the role. While it is somewhat unusual to have both a former Chair and a current Chair serving simultaneously, I expect the transition to be relatively smooth. I anticipate Powell will step aside later this year, assuming ongoing concerns surrounding the Fed headquarters issue dissipate. In a moment of rare comedic entertainment at a Powell Press conference, in response to a reporter’s questions, he demonstrated how he would maintain a low profile despite staying in-place as Governor.
Notably, Fed funds futures suggest markets are pricing in no rate cuts for the remainder of 2026, reflecting persistent inflation concerns, a resilient economy, and a still‑stable labor market.
Equity markets responded favorably to earnings results from Alphabet, Amazon, Meta, and Microsoft, with the S&P 500 advancing to a new all‑time high following Wednesday’s announcements. Strong earnings and continued commitments to elevated capital expenditure plans reinforced investor confidence in the long‑term growth outlook for the sector. That said, performance within the group was mixed, as concerns around Meta’s ability to sustain margins weighed on its shares.
Oil and interest rate markets remained exceptionally volatile throughout the week. Tensions escalated after Iranian officials presented what was quickly characterized as a “non‑starter” proposal to end the conflict - one that excluded any concessions related to Iran’s nuclear program. Brent crude prices surged above $126 per barrel before reversing sharply, falling back below $110 by week’s end. Late‑week reports suggesting Iran may be open to diplomacy helped calm markets somewhat, though similar rhetoric in the past has failed to produce lasting resolutions.
Rate markets closely tracked movements in oil prices. The 10‑year U.S. Treasury yield tested its March closing high near 4.42% before retreating modestly to end the week just below 4.40%. Longer‑term inflation concerns have temporarily taken a back seat to near‑term energy price dynamics, which continue to drive intra‑day rate volatility. While the “higher‑for‑longer” narrative remains firmly in place, I would not rule out a test of the psychologically important 4% level later this year should geopolitical risks recede and oil prices normalize.
Economic data received relatively little attention last week, though what was released reinforced the picture of a strong U.S. economy. Personal spending and durable goods orders exceeded expectations, and the Fed’s preferred inflation measure - Personal Consumption Expenditures - came in firm, underscoring the importance of vigilance on inflation, particularly amid elevated energy costs that are increasingly visible at the gas pump.
Looking ahead, the calendar becomes more data‑heavy, with key releases including JOLTS, ADP employment, University of Michigan consumer sentiment, Nonfarm Payrolls, and the Unemployment Rate. These reports will help determine whether recent strength in growth and labor data persists - and whether market expectations around rates remain appropriately calibrated.
From the Municipal Desk (with contributions from Ryan Riffe):
Municipal bonds moved in step with Treasuries last week, with benchmark yields rising by as much as 12 basis points. The flattening trend persisted, as intermediate and longer maturities outperformed the front end. Benchmark yields in the 2‑ to 3‑year part of the curve currently sit below 2.50%, while SIFMA and municipal money market funds remain closer to 3.00%. These dynamics continue to apply pressure to the front end of the municipal curve.
As April came to a close, there were a few positive takeaways from what otherwise felt like a week short on good news. Fund flows remain constructive, with Lipper data showing more than $600 million moving into municipal bond funds. Many negotiated deals were oversubscribed in intermediate and longer maturities, supported by a noticeably stronger retail presence. Competitive deals were aggressively bid up and down the curve, particularly in the high‑tax states.
The new‑issue calendar also remains robust, as the market continues to push toward what could exceed total issuance levels seen in 2025. This pace of supply has inflated dealer inventories, which in turn continues to place added pressure on the secondary market. Looking ahead, May marks the start of a more favorable technical period, as reinvestment capital begins to increase meaningfully.
While volatility is likely to persist, we are encouraged by the supportive backdrop of ongoing fund inflows, rising reinvestment capital, and attractive absolute yield levels. Together, these factors should help provide a stabilizing influence and, over time, help move the municipal market in a more constructive direction.
Weekly Supply @ $13+ Billion
2-YR Ratio @ 64%
3-YR Ratio @ 63%
5-YR Ratio @ 64%
10-YR Ratio @ 67%
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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