Municipal Markets Weekly: Munis move closer to fair value ahead of strong 1H July technicals. Fund flow drivers. SMA AUM update. Midterms preview

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Municipal Markets Weekly: Munis move closer to fair value ahead of strong 1H July technicals. Fund flow drivers. SMA AUM update. Midterms preview

Peter DeGroot AC (1-212) 834-7293 Roisin A Gargan (1-212) 834-7010 Global Markets Strategy J P M O R G A Npeter.degroot@jpmorgan.com roisin.gargan@jpmchase.com

J.P. Morgan Securities LLC J.P. Morgan Securities LLC 26 June 2026

Ye Tian (1-212) 834-3051

ye.tian@jpmorgan.com

J.P. Morgan Securities LLC

Municipal Markets Weekly

Munis move closer to fair value ahead of strong 1H July

technicals. Fund flow drivers. SMA AUM update. Midterms

preview

• Economic data was mostly strong this week, including initial claims, consumer

spending, and the flash PMIs. On the downside, new home sales disappointed.

• The risks for Treasury yields seem skewed higher over the medium term, but our

rates team is mindful that near-term rebalancing dynamics could leave further room for

yields to decline over the coming week, so they remain patient in entering outright

duration shorts.

• Unlike past historic inflow periods, current year-to-date flows are not explained by an

episodic rate move or outsized municipal market performance. Instead, over the past

year, flows are fairly well explained by two variables (72% R2): municipal taxable-

equivalent yields and municipal TEY less S&P earnings yield. However, these two

variables do a poor job of explaining flows over an extended period of time.

• The model more consistently explains a substantial proportion (87% R2) of munici-

pal fund flows over the post-TCJA period when we add additional factors: S&P earn-

ings yield, IG municipal taxable equivalent yield, Municipal IG Index total return,

tax-exempt net supply, and the Fed Funds Rate.