Treasury yields moved lower last week with 10-year yields declining 7 bps and 30-year yields falling 4 bps. Municipal yields diverged from Treasuries and increased week-over-week. The May CPI report was released last week. The inflation print met expectations, with prices increasing 0.5% month-over-month and 4.2% over the last 12 months, the highest annual level in three years. On a positive note, core CPI, which removes the impact of food and energy prices, came in below market expectations. The Fed will hold its June FOMC meeting this week. While the Fed is widely expected to leave rates unchanged, the meeting is noteworthy as it will be Kevin Warsh’s first meeting as Fed Chairman. Market participants received a pleasant surprise on Sunday as news broke that the United States and Iran had agreed on a memorandum to end the Middle East conflict. Equity markets have seen the largest movement today as a result of the agreement, while the bond market is largely unchanged.

U.S. Treasuries faced volatility last week, pressured initially by geopolitical tensions surrounding U.S.-Iran negotiations and rising oil prices. While rates retreated briefly last Thursday amid equity market strength, they rose on Friday following a stronger-than-expected Nonfarm Payroll report. Notably, 5-year and 10-year Treasury yields increased 16 and 10 bps, respectively. Fed Fund futures are now pricing in one full rate hike by December 2026. Municipals outperformed last week, with yields moving lower across the curve against a backdrop of rising Treasury yields. Despite a heavy new issue calendar, investor demand remained robust, driven by June reinvestment cash flows. Market technicals held steady, as municipal bond funds recorded $1.4 billion in inflows last week. This marks the fifth consecutive week of inflows exceeding $1 billion. Municipal supply is expected to remain strong this week with over $9.96 billion in expected negotiated issuance, including nearly $900 million from the healthcare sector.