Treasury yields rose last week, with 10- through 30-year yields increasing 5 to 6 bps, while municipal yields diverged, declining 3 bps at the 1-year and 5-year levels but rising at the longer end of the curve, notably with the 20-year MMD up 7 bps. Municipal bond funds attracted $674 million of inflows, following $851 million the prior week, marking three consecutive weeks of positive flows and a strong start to 2026. The week begins with Monday’s ISM Manufacturing Index, expected at 48.3 versus the prior 48.2, followed by Wednesday’s ISM Services Index, which is forecast at 52.2 compared to the previous 52.6. Looking ahead, Thursday’s Jobless Claims are expected to rise to 205K from 199K, while Friday’s Consumer Sentiment data has a consensus of 53.5, up from 52.9. Although the market is currently pricing in an 84% chance of a January Fed rate cut, this week’s economic releases will be a key deciding factor as markets fully return to business following the quieter holiday period.

Treasury yields were stable last week, with the 10-year and 30-year yields falling 2 bps and 1 bp, respectively, while municipal yields were relatively unchanged. Municipal bond funds experienced $863 million of inflows, following $218 million of inflows the prior week. Looking ahead, the Chicago PMI report will be released on Tuesday with a consensus of 39.5 for December, up from 36.3 in November, while Friday’s PMI manufacturing report has a consensus of 51.8 compared to the prior month’s 52.1. Also on Friday, the construction spending report is expected to remain flat following 0.2% growth the month prior. While the market is currently pricing over an 81% chance of another Fed rate cut in January, upcoming economic data will be the key factor in determining if that cut takes place; until then, market activity is expected to remain relatively cool during this week between two major market-observing holidays.