AA-rated PSF-guaranteed ISD paper trading inside +5 to AAA MMD. Callable 2017 coupons of 4.00-5.00% produce 3-5% PV savings; qualifying current refundings warrant Board authorization now.
District-voted authorization executions remain favorable. Intermediate PSF-enhanced structures clearing at sub-3.50% TIC; front-loaded 5% coupons maximize proceeds for construction draws.
The bond market has been rallying over the last 2 weeks on "optimism" about a peace deal with Iran, as oil prices continued to drop. WTI closed under $85/bbl on Friday - the first time since April 17. Yesterday, both Iran and President Trump agreed to peace terms. The Memorandum of Understanding (MOU) will be signed this Friday, June 19, in Geneva, Switzerland. The devil will be in the details over the next 60 days on dismantling the nuclear stockpile.
May CPI was released last Wednesday. Headline CPI: +0.473% MoM, +4.249% YoY - driven largely by gasoline, which rose 7% in May. Core CPI (ex-food & energy): +0.208% MoM, +2.9% YoY - below estimates.
This week is the first FOMC meeting to be led by new Fed Chairman Kevin Warsh. Markets expect no change in rate policy. Markets expect a change in the policy statement to a neutral bias from an easing bias. The Dot Plot is expected to show an increase of 25 bps on the Dec 2026 dot from the previous Dot Plot released at the March meeting. Warsh is expected to mention in his press conference that he wants the Fed to shrink its balance sheet (a form of quantitative tightening), to be accomplished over a long time gradient.
Bond Auctions: Tuesday: $13 billion - 20-Year. Thursday: $24 billion - 5-Year TIPS. Economic Release of the Week. May Retail Sales (Wednesday): est. +0.5%. Market Holiday. Markets closed Friday.
With the labor market being stable, the Fed can focus on inflation. There are economic signs that the economy is re-accelerating and that this is not the time for rate cuts. Currently, forward Fed funds are pricing for a 25 bps hike in rates by the end of 2026.
| Meeting | Hold | Cut | Hike |
|---|---|---|---|
| Jun 2026 | 96% | 1% | 3% |
| Jul 2026 | 82% | 2% | 16% |
| Sep 2026 | 62% | 3% | 35% |
| Dec 2026 | 46% | 4% | 50% |
Implied probabilities derived from 30-Day Fed Fund futures (CME FedWatch).
| Tenor | Current | Δ WoW | Prior Wk | Prior Mo | Prior Yr | 8-Wk Trend |
|---|---|---|---|---|---|---|
| 2Y | 4.05% | -8 bp | 4.13% | 4.09% | 3.97% | |
| 5Y | 4.16% | -10 bp | 4.26% | 4.26% | 4.04% | |
| 10Y | 4.43% | -10 bp | 4.53% | 4.59% | 4.46% | |
| 30Y | 4.93% | -8 bp | 5.01% | 5.12% | 4.96% |
| Tenor | Current | Δ WoW | Prior Wk | Prior Mo | Prior Yr | 8-Wk Trend |
|---|---|---|---|---|---|---|
| 1Y | 2.33% | — | 2.33% | 2.61% | 2.64% | |
| 5Y | 2.63% | +5 bp | 2.58% | 2.73% | 2.75% | |
| 10Y | 2.97% | +2 bp | 2.95% | 3.09% | 3.32% | |
| 20Y | 3.86% | — | 3.86% | 4.02% | 4.30% | |
| 30Y | 4.30% | — | 4.30% | 4.46% | 4.54% |