Archived Update

Texas

Texas Issuer Impact

Strategic Signals & Commentary
Favorable

Refunding

Opportunity

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.

Favorable

New Money

Opportunity

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.

Inflation & Treasury Market Overview

Last week's June inflation data came in much better than expected, surprising markets and meaningfully lowering the odds of a near-term rate hike: June CPI -0.4% with Core CPI unchanged, June PPI -0.3% with Core PPI +0.1%, and year-over-year Core CPI declining to 2.6% from 2.85%. The rapid decline was largely attributable to lower oil prices during June following de-escalation in the Middle East. Conditions have since reversed: renewed hostilities have emerged and the U.S. has reinstated its blockade of the Strait of Hormuz, pushing WTI back above $80 per barrel and bringing inflation fears back into market pricing.

Federal Reserve Policy Outlook

The tame June CPI print has convinced markets that the Fed will not raise rates at next week's July FOMC meeting. However, markets are pricing approximately a 90% probability of a rate hike at the October meeting, reflecting renewed concern that rising energy prices could reignite inflation. Fed officials are in their pre-meeting blackout period and will not be speaking this week.

Treasury Supply & Economic Calendar

Wednesday brings a $13 billion 20-Year Treasury auction and Thursday a $21 billion 10-Year TIPS auction. The economic data calendar is light this week.

Macro Outlook

With minimal economic data scheduled and the Fed in blackout, the bond market is expected to take direction from and closely follow price action in the oil market. Higher oil projects higher inflation, which in turn projects higher interest rates. Treasury yields are likely to remain correlated with energy prices and Middle East developments until the FOMC meeting resets the conversation next week.

AAA MMD Yield Curve

Current Week Prior Month Prior Year

Federal Reserve & Market Expectations

Fed Funds Target
4.25% - 4.50%
FOMC Stance
No hike expected at the July 29 FOMC after the tame June CPI print; ~90% probability of a rate hike at the October meeting as rising energy prices threaten to reignite inflation
Meeting Hold Cut Hike
Jul 2026 95% 0% 5%
Oct 2026 10% 0% 90%

Implied probabilities derived from 30-Day Fed Fund futures (CME FedWatch).

U.S. Treasury Benchmarks

Tenor Current Δ WoW Prior Wk Prior Mo Prior Yr 8-Wk Trend
2Y 4.18% -3 bp 4.21% 4.20% 3.91%
5Y 4.28% -2 bp 4.30% 4.27% 4.01%
10Y 4.55% -1 bp 4.56% 4.49% 4.47%
30Y 5.06% — 5.06% 4.93% 5.01%

Municipal AAA MMD Benchmarks

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%