Hedge now, rally later Industry Overview

Municipals Weekly Hedge now, rally later

31 July 2026 Key takeaways • Markets didn't find the Fed hawkish enough; equities and bonds sold off but munis Municipals United States outperformed. Hedge until Fall rally • We still think muni yields peaked in Apr-25 despite a new high for the 30yr Tsy; Table of Contents historically, the two are not always in sync Market views and strategies 2 • Ch.12 filings are an overlooked warning sign for rural muni credit & state dispersion is striking with the most stress in AR Performance 4 Supply & demand 6 Curve 7 Fed underwhelms; munis hold their ground Relative value 8 July's FOMC landed poorly: neither the statement nor Warsh's presser was hawkish Trade activity 10 enough for markets, sending the equities market down and Treasury rates higher. Credit corner 11 September hike odds fell from nearly 100% to 65%, long-end yields rose 13bp, and the Defaults, distress & HY 15 10s30s Treasury steepened to 52bp. The risk of Treasury yields breaking their summer Acronyms 17 ranges has risen. Munis outperformed, gaining Wednesday despite the selloff, with the Research Analysts 22 10s30s AAA flattening to 113bp. Favorable technicals persist as issuance runs well below forecast. We still expect a Fall rally but recommend investors stay focused on portfolio hedging over the summer. Yingchen Li Municipal Research Strategist Unsynchronized munis and Treasuries BofAS We show that munis and Treasuries are often not synchronized by reviewing 2013-2020 Ian Rogow market levels. Our position that muni yields peaked in April 2025 remains unchanged, Municipal Research Strategist BofAS despite a newer high for the 30yr Treasury since August 2007. 10s30s AAA flattening should continue as long as the 10s30s Treasury remains below 60bp. John Lombardi Municipal Research Strategist Quiet Chapter 9, louder Chapter 12 BofAS It has been 105 days since Greenwood Leflore Hospital filed its Chapter 9 bankruptcy Sophie Yan petition, tied for the 45th-longest gap since 1987. We still expect low single-digit, Municipal Research Strategist BofAS idiosyncratic Chapter 9 filings in 2026. More instructive, maybe, is Chapter 12 (family farmers), an overlooked early-warning signal for rural muni credit. State dispersion is John Reilly striking: AR shows the most stress at one filing per 674 family farms vs OH’s nearly Municipal Research Strategist BofAS 14,500 – a 20x gap. See Team Page for List of Analysts Key market figures Supply: YTD issuance totals $345.5bn, up 4% y/y. New money is down 3% while Recent Municipals Research refundings are up 26% y/y. Rates & ratios: The 10yr AAA MMD was 6bp higher w/w as Municipals Weekly: Reading the muni tea of 29 July to 3.30% while the 30yr AAA MMD climbed 2bp to 4.43%; the 10yr muni/Tsy leaves 24 July 2026 ratio cheapened 1.8ppt w/w to 71.4% and the 30yr ratio cheapened 0.4ppt to 86.1%. Returns: MTD as of 29 July, U0A0 returned -1.41%, but lagged govies by 45bp, and Municipals Weekly: Supply light, ratios tight poised to be the second weakest July since 1990. Spreads: IG spreads were unchanged 17 July 2026 at 15bp w/w as of 29 July. HY spreads tightened 2bp to 149bp, a new 52-wk tight. Trade activity: MTD as of 29 July, $156.7bn of muni par value traded in the secondary, Municipals Weekly: Noise > direction for the with a daily avg of $8.2bn, down 0.6% m/m and 7.3% y/y. summer 10 July 2026

Municipals Educational Series: State and local tax treatment of municipal bonds, by BofA Securities does and seeks to do business with issuers covered in its research state 06 July 2026 reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this Municipals Weekly: The case for richer ratios report as only a single factor in making their investment decision. & a flatter curve 02 July 2026 Refer to important disclosures on page 19 to 21. Municipals Quarterly: 2Q26 in review 01 July 2026

Exhibit 1: Overweight high grades and solid A-rated long duration bonds in 2026 Strategic and tactical views & key forecasts Strategic views • (1) High grade bonds, solid A-rated bonds*: overweight in 2026 •…