- Municipal Fund Flows Cool but Remain. Constructive: Investors added $782 million to municipal bond mutual funds in the week ended March 11, down from $1.45 billion the prior week, per Investment Company Institute data. The deceleration is notable but not alarming — net inflows remain positive, and the composition matters: the bulk of capital continues to migrate into higher-grade credits, reflecting a flight-to-quality posture consistent with the broader risk-off tone driven by the Iran conflict. Tax-exempt income remains in demand; investors are simply becoming more selective about where they reach for it.
- Treasuries and Mortgages – Oil Is Driving the Rate Bus: T-bill and Treasury yields have moved in lockstep with crude oil since the Iran conflict escalated, and the transmission into mortgage markets has been swift. The 30-year contract rate rose 11 basis points to 6.30% in the week ended March 13, following a comparable move the week prior — the largest two-week advance since April 2024. Refinancing activity has pulled back sharply. With no near-term resolution visible in the Middle East, we expect Treasury yields to continue grinding higher in the near term. Oil and T-bills are trading as one; plan for volatility for at least the next 60 days.
- The FOMC Hold: The March hold was fully priced in. What mattered was the signal. The Committee’s acknowledgment that AI-driven productivity gains are lifting the neutral rate — and their upward revision to growth projections across the forecast horizon — is a structurally hawkish development, particularly given the simultaneous downside risks from the Iran war and questions about the durability of AI-related capital investment. One dissent, from Governor Stephen Miran, favored a cut; Governor Waller, who dissented dovishly in January, voted with the majority this time. The Committee’s silence on two-sided language around the rate path reads as intentional — a deliberate signal that they are not preparing markets for imminent easing.
- One Cut, Maybe Two: Despite marking up inflation projections, the median dot still pencils in one cut for 2026. Some will read that as dovish. The upward revision to the neutral rate and the shift in dot plot distribution toward fewer cuts tell a more hawkish story. We are in the one-to-two cut camp, leaning toward one. That said, we do expect yields to drift lower over the course of the year — a move toward 4.50% on the 10-year Treasury is achievable — but that path will be uneven, and the Iran wildcard introduces real two-way risk.
- Municipals: Holding, But Dealers Are Backing Away: MUNI rates have held relatively stable over the past several sessions, but the month-to-date picture tells a different story — yields have risen across the curve, reversing a strong start to the year. The brief Treasury rally earlier this week — which trimmed yields 4–6 basis points as oil retreated from near $100/bbl toward $94 — provided modest relief. But the durability of that move is suspect. More tellingly, dealer behavior is shifting: bids are being backed up as Middle East uncertainty persists, and market-making conviction is thin. In a market where liquidity matters, that is worth watching closely.
- Supply Is Heavy, Absorption Has Been Impressive — but Has a Ceiling: Visible supply remains elevated, and credit to the market for digesting it, given the rate backdrop. But with yields at current levels and the geopolitical environment unresolved, we expect issuance to slow as issuers wait for a more stable window. That could provide a technical tailwind for existing MUNI holders if demand holds — but the prerequisite is a clearer signal from either the Fed or the Middle East, and neither appears imminent.
Bottom Line
The bond market is being pulled in two directions — a Fed that is structurally more hawkish than its single-cut dot implies, and an oil-driven rate shock with no defined endpoint. MUNIs are weathering it better than most, but the risk-reward for adding duration here is asymmetric until oil stabilizes. Stay up in quality, watch dealer bid behavior as a leading indicator, and treat any Treasury rally as tactical rather than a trend change until crude prices confirm a sustained retreat.
Securities offered through NewEdge Securities, LLC, member FINRA and SIPC. The DRL Group is not a subsidiary or control affiliate of NewEdge Securities, LLC. NewEdge Securities, LLC. has no affiliation to BondDesk Trading LLC or BondTrader Pro, or Tradeweb Direct, Bondpoint, TMC, Market Axess or any ECN.
Yield to call (YTC) is not indicative of total return; this yield is valid only if the security is called. Bonds may or may not be called, or be callable on multiple dates or, in other cases, called any date following the first call date, so yield to call is based on the earliest stated call date. Discounted bonds may be subject to capital gains tax. Bonds may be subject to OID (Original Issue Discount). Prices and availability may change at anytime without notice.
Do not buy bonds based on the Yield to Call (YTC). Insured bonds are issued for timely payment of principal and interest only. Insured bonds do not cover potential market loss and are subject to the claims paying ability of the insurance company.
Non-rated (NR), With-Drawn (WR), or below investment grade bonds, lower rated bonds, carry a greater potential risk of default & should be considered by sophisticated investors only.
This document is for informational purposes only and does not replace or serve as a substitute for your official monthly statement generated by NFS. Please refer to your official statement for accurate and comprehensive account details.
Bonds may be subject to capital gains tax. This summary is for informational purposes only and is not an offer or solicitation for the purchase or sale of any security or a recommendation or endorsement of any security or issuer. NewEdge Securities, LLC. and DRL Group make no representation about the accuracy, completeness, or timeliness of this information. Bonds could also be subject to the DeMinimis Rule, please consult with your tax advisor for further clarification.
Call us at 281-398-8600 to invest in these or any of our other offerings today.
