Treasury yields increased last week, as the 10-year and 30-year yield rose 5 bps and 6 bps, respectively. While the 10-year municipal yield fell by 1 bp, the 30-year yield rose 3 bps. Municipal bond funds experienced $16 million of inflows, following $737 million of inflows in the prior week. The November jobs report will be released on Tuesday, with the consensus for payrolls at a gain of 40k and the jobless rate up to 4.5%. On Wednesday, the Fed delivered its third consecutive 25 bp rate cut of the year, an outcome markets had fully anticipated. Job openings rose by 12k in October, marking the third consecutive monthly increase and the highest level since May. Meanwhile, the quits rate fell to 1.8%, its lowest level in more than five years, signaling rising worker caution. Even with a small increase in openings, hiring declined by 218k and layoffs increased by 73k, pointing to a labor market slowing beneath the surface. The Fed is officially projecting one rate cut by year-end 2026, while markets are pricing a little over two cuts. Given a softening labor market in 2026 and fading inflation pressures, market participants continue to expect a more aggressive easing path than what the Fed is currently pricing in.

Treasury yields increased last week, as the 10-year and 30-year yield both rose 12 bps. Municipal yields followed to a lesser extent, as the 10-year yield rose 2 bps, and the 30-year yield rose 5 bps. Municipal bond flows experienced $736 million of inflows, following $682 million of inflows in the prior week. Consumer sentiment improved in early December for the first time in five months, but the headline index still sits close to its lowest levels in nearly 50 years. On a three-month moving average, both ADP and nonfarm payrolls have been drifting lower, signaling a more subdued picture of labor demand. Headline PCE edged up by 0.1% in September, while core PCE dipped by 0.1% year-over-year. Despite these small moves, both measures have remained largely rangebound for the past 20 months, showing no evidence of runaway tariff-driven inflation. Overall inflation trends remain benign, and the Fed’s preferred supercore PCE continues to drift lower. Although this report is slightly dated, this is the last major inflation release before next week’s Fed meeting. Combined with softer spending, it strengthens the case for a 25 bp rate cut, with the current probability of the Federal Reserve cutting rates this Wednesday nearing 90%.