Municipals Weekly Stabilization in order

Municipals Weekly Stabilization in order

18 September 2026 Key takeaways • Fed's 25bp hike and hawkish tone, plus Treasury buybacks, should steady market. Municipals United States Whole AAA curve attractive; long end best. • AAA yields up 49bp since 14 Aug and the exemption value nears 300bp. We map yield Table of Contents bogeys by maturity, rating, sector, coupon. Market views and strategies 2 • Munis grew $75bn q/q to $4.54tn in 2Q26. Dealers +26.6%, ETFs +10.3%, households +3.3% to over $2.1tn. Performance 3 Supply & demand 3 Curve 3 Fed’s action and posture should stabilize the market Relative value 3 The Fed hiked 25bp Wednesday and signaled another 2026 hike in the Dots Plot. Chair Trade activity 3 Warsh sounded hawkish, citing strong growth, a solid labor market and sticky inflation. Credit corner 3 The Treasury curve flattened sharply this week while munis barely budged, awaiting Defaults, distress & HY 3 Treasury stabilization. In our view, the Fed’s firmer posture plus Treasury buybacks of Acronyms 3 long bonds should steady the market and put munis on good footing for the long- Research Analysts 3 awaited Fall rally. We find the entire AAA curve attractive, but the long end offers the best potential for outperformance. The 10yr AAA spot should lead any sustainable reversal, with 2s10s AAA flattening beginning now after months of steepening. The Yingchen Li timing is helpful: September MTD issuance of roughly $37bn is 50% higher y/y, with new Municipal Research Strategist BofAS money up 74%, giving investors far more bonds to choose from. Ian Rogow Shooting for higher yield bogeys Municipal Research Strategist BofAS With the sharp move higher in rates since mid-August and the Fed’s 16 September hike, investors’ yield targets and expectations shifted. Note that the tax exemption’s value is John Lombardi near 300bp, a threshold breached only twice in two decades. We map where investors Municipal Research Strategist BofAS can find specific yield bogeys by maturity, rating, sector and coupon. Sophie Yan Muni market expands to $4.54tn as of 2Q26 Municipal Research Strategist BofAS The muni market stood at $4.54tn as of 2Q26, per Flow of Funds data, expanding $75.0bn q/q. Brokers & dealers’ muni holdings grew the most on a percentage basis, up John Reilly 26.6% q/q and ETFs’ holdings grew 10.3%. Households & nonprofits’ holdings grew by Municipal Research Strategist BofAS 3.3% to over $2.1tn. See Team Page for List of Analysts Key market figures Supply: YTD issuance totals $447.9bn, up 7% y/y. New money is up 1% while refundings Recent Municipals Research are up 28% y/y. Rates & ratios: The 10yr AAA MMD climbed another 17bp w/w as of Municipals Weekly: Tougher to turn around 16 September to 3.74% while the 30yr AAA MMD rose 12bp to 4.91%; the 10yr so far 11 September 2026 muni/Tsy ratio cheapened 1.02ppt w/w to 74.9% and the 30yr ratio cheapened 1.32ppt to 92.0%. Returns: MTD as of 16 September, U0A0 returned -2.02%, underperforming Municipals Educational Series: Primer on govies, corporates and taxable munis by 67bp+. Spreads: IG spreads widened 2bp to taxable bonds 09 September 2026 12bp w/w as of 16 September. HY spreads widened 1bp to 143bp. Trade activity: MTD as of 16 September, $132.4bn of muni par value traded in the secondary, with a daily Municipals Weekly: Hawkish Fed, Patient avg of $12.0bn, up 38.6% m/m and 29.5% y/y. Bull: Positioning for the Fall rally 04 September 2026

Municipals Weekly: Surprising sources of BofA Securities does and seeks to do business with issuers covered in its research refunded bonds 28 August 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 Educational Series: Primer on report as only a single factor in making their investment decision. premium bonds 25 August 2026 Refer to important disclosures on page 19 to 21.

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)…