J.P. Morgan Municipal Morning Intelligence

Research evidence excerpt

J P M O R G A N

Global Markets Strategy

20 August 2026

J.P. Morgan Municipal Morning

Intelligence

Intentions to increase long-end buyback operations

spark Treasury rally and muni inflows. Durability of UST

curve flattening questioned.

Tax-Exempt Market Wrap

– The HG muni scale was bumped 3-4bp, while Treasury yields fell up to 9bp in

the long-end on the news of announced intentions to increase Treasury buyback

operations. The municipal narrative was driven by the broader UST market rally and

a spike in inflows (+$676mn). Elevated BWIC volume ($3.1bn, +19% vs. the 5week same-day average) and a solid hit ratio (+6%) illustrated the two-way nature

of trading on the day, which also saw a heavy $4.3bn tax-exempt calendar.

– The timing of Treasury’s surprise announcement to increase the size of

buyback operations for longer-dated nominal Treasuries, from a current maximum

of $2bn per operation to “at least” $4bn is highly unusual, as Treasury had announced

its buyback operations calendar for the next three months at the August refunding just

two weeks ago, and we can find nothing in market functioning that would force an

increase long-end buybacks at this moment. Our colleagues think Treasury is likely

uncomfortable with the rise in long-term yields, as it runs against the Secretary’s

stated goal. However, absent real fiscal consolidation, we fear this could

contribute to higher term premium and yields over time, should Treasury become

more opportunistic in its approach to debt management and move further away from

its “regular and predictable” tenet. This raises the risk Treasury could reduce long-end

auction sizes, though we do not think this would be a prudent action in the context of

increasing funding gaps, nor do we think this would have a lasting impact on yields.

Indeed, we see evidence that similar actions from other DMOs globally have all

had temporary effects on the term structure and not a lasting impact, and we

recommend holding onto 2s/10s steepeners (UST Daily, Barry et al., 8/19/26).

– Muni fund flows returned to positive territory yesterday, hitting 1.8x the trailing

20-session average at +$676mn, more than offsetting the $248mn in outflows

…