Municipals Weekly “Range bound Summer” gives way to “Fall rally”

Municipals Weekly “Range bound Summer” gives way to “Fall rally” Industry Overview

21 August 2026 Key takeaways • The "range bound Summer" is over; Fall rally should launch with Treasury's long-bond Municipals United States buybacks the first green light. • A Democratic House win suggests stable-to-lower MMD, supporting reinvestment Table of Contents demand and duration extension. Market views and strategies 2 • S&P/Moody's 2Q26 combined upgrade to downgrade ratio was 0.7 to 1; highest Moody's multi-notch downgrades since 3Q18. Performance 6 Supply & demand 8 Curve 9 Treasury’s curve twisting move supports market rally Relative value 10 This week’s events support our call for a reversal and curve flattening. We see the end of Trade activity 12 the “range bound Summer” and launch of the “Fall rally.” Treasury’s move to double Credit corner 13 long-bond buybacks, engineering a la 2011’s “Operation Twist,” is the first green light. Defaults, distress & HY 16 Add duration, position for flattening, and under-hedge. Acronyms 17

Elections & munis: historical support for firmer muni bid Research Analysts 22

Across the 22 elections since 1982, scenarios where Republicans lose control in Congress saw 10yr AAA MMD rally by 35 days post-election. Samples are narrow with Yingchen Li heavy macro overlays, but a Democratic House win suggests stable-to-lower MMD, Municipal Research Strategist BofAS supporting reinvestment demand and extending duration. Ian Rogow A look at US banks’ 2Q26 muni holdings Municipal Research Strategist BofAS US bank balance sheets showed $90.7bn of held-to-maturity (HTM) muni bonds on an amortized cost basis and $190.2bn of available for sale (AFS) munis on a fair value basis John Lombardi as of 2Q26 per the Federal Financial Institutions Examination Council (FFIEC). The data Municipal Research Strategist BofAS also shows US banks hold another $189.4bn of muni loans. Sophie Yan 2Q26 rating activity: more downs than ups Municipal Research Strategist BofAS Combined upgrades from S&P and Moody’s during the 2Q26 were below the combined downgrades, with an upgrade to downgrade ratio of 0.7 to 1. S&P’s activity was more John Reilly negative than Moody’s during the quarter. We saw 25 multi-notch downgrades from Municipal Research Strategist BofAS Moody’s in 2Q26, the highest since 3Q18’s 27. See Team Page for List of Analysts Key market figures Supply: YTD issuance totals $387.5bn, up 2% y/y. New money is down 5% while Recent Municipals Research refundings are up 25% y/y. Rates & ratios: Both the 10yr and 30yr AAA MMD were 7bp Municipals Weekly: Reversing like October higher w/w as of 19 August to 3.31% and 4.52%, respectively; the 10yr muni/Tsy ratio 2022? 14 August 2026 cheapened 2.0ppt w/w to 71.2% and the 30yr ratio cheapened 2.2ppt to 86.9%. Returns: MTD as of 19 August, U0A0 returned 0.41%, underperforming govies, Municipals Weekly: Pressure for higher corporates and taxable munis but modestly outperforming HY munis. Spreads: IG yields remains 07 August 2026 spreads unchanged at 13bp w/w as of 19 August. HY spreads unchanged at 153bp. Trade activity: MTD as of 19 August, $117.3bn of muni par value traded in the Municipals Weekly: Hedge now, rally later 31 secondary, with a daily avg of $9.0bn, up 9.3% m/m and 0.2% y/y. July 2026

Municipals Weekly: Reading the muni tea leaves 24 July 2026 BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of Municipals Weekly: Supply light, ratios tight interest that could affect the objectivity of this report. Investors should consider this 17 July 2026 report as only a single factor in making their investment decision. Refer to important disclosures on page 19 to 21. Municipals Weekly: Noise > direction for the summer 10 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 • (1) Territories; (2) small private colleges; (3) rural, single-facility hospitals: underweight • Overweight long maturity munis in a bull…